California Governor Signs Landmark Student Loan Protection Bill
In a historic move today, California Governor Gavin Newsom enacted sweeping law to protect student loan borrowers.
Called a student loan borrower’s bill of rights, the new law establishes enforceable, state-wide industry standards for student loan services and protects student loan borrowers from unfair, deceptive and predatory practices. services and lenders. The bill was previously approved by the California State Assembly; the state Senate followed suit in August.
“With the signature of Governor Newsom, [the] The Student Borrower Bill of Rights is now a law ensuring that millions of people in debt have the consumer rights and protections they deserve, ”Natalia Abrams, director of the student debt crisis, said in a statement. “For years, thousands of California student loan borrowers have told us about problems with student loan companies. These problems that stole millions of dollars from people and caused real stress to families who had no recourse. Now, with the Student Borrower Bill of Rights, Californians have real and enforceable rights and can take action when they are harmed. “
“Today is a huge win for student borrowers in California,” said Kristin McGuire, Western Region Manager at Young Invincibles. Adopting AB 376 will help ensure that these borrowers, as well as veterans, are protected from the predatory lending practices that have plagued our communities for far too long. We applaud Governor Newsom’s leadership and his efforts to protect borrowers.
California’s new rules ban abusive student loan management practices, such as falsely directing borrowers to forbear and stepping away from assistance programs such as income-based repayment. It also creates minimum service standards related to the enforcement of student loan payments and the retention of key records, and would also require specialized customer service training for staff. Importantly, the new law creates an office of the Student Borrowers Ombudsman, which would be responsible for reviewing and processing complaints submitted by borrowers, as well as collecting and analyzing key data. And it establishes special protections for military personnel and their families as well as nurses, teachers and the disabled community.
The service of student loans is widely seen as problematic. Several state attorneys general have sued top federal student loan officers, alleging widespread misconduct. A new report released last month confirmed that student loan managers continue to have significant problems administering federal loan programs such as Public service loan remission. And even the United States Department of Education’s own Inspector General found important issues with the service of student loans, including a lack of proper oversight.
Critics of the bill question the ability and authority of states to regulate student loan services that are under contract with the federal government, citing the supremacy of federal law over state law. However, several recent court decisions affirmed the ability of states to regulate federal student loan services under state consumer protection laws.