1. November 7 – 9, Sheraton Downtown, Nashville, TN
State Law Round‐Up
Moderator: Tom Ternes, Bank of North Dakota
Speakers: John Culhane, Ballard Spahr
Stefanie Jackman, Ballard Spahr
2016 Knowledge Symposium
November 7 – 9, Sheraton Downtown, Nashville, TN

2. John L. Culhane, Jr., Partner Stefanie H. Jackman, Partner
State Law Round Up Student Loan Servicing Statutes and Pending Legislation and Other Noteworthy Developments NCHER KNOWLEDGE SYMPOSIUM November 8, 2016 Nashville, TN
John L. Culhane, Jr., Partner
Consumer Financial Services Group
Ballard Spahr LLP
Stefanie H. Jackman, Partner
Consumer Financial Services Group
Ballard Spahr LLP
Copyright 2015 by Ballard Spahr LLP

3. Features of State Statutes Vary
Student loan ombudsman
Servicer licensing
Dispute resolution procedures
Servicing transfer notices
Disclosure of repayment and loan forgiveness options
Other conduct requirements and restrictions
Record retention
Penalties for non-compliance

4. Connecticut – Public Act 15-162
Student loan ombudsman
Designated by Commissioner of Department of Banking
Duties include resolving and reporting on borrower complaints
Licensing (took effect July 1, 2016)
Required to service loans to CT residents (borrower or cosigner)
Servicing definition tracks CFPB larger participant rule
Banks and subsidiaries exempt but subject to recordkeeping rules
Dispute resolution procedures
No formal requirements
Ombudsman and Banking Commissioner can get involved

5. Connecticut – Public Act 15-162 (cont.)
Servicing transfer notices
Law does not address
Disclosure of repayment and loan forgiveness options
Law does not specifically address
Other conduct requirements and restrictions
Employing scheme, device, or artifice to defraud or mislead (directly or indirectly)
Engaging in any unfair or deceptive practice toward any person or omitting any material information in connection with servicing
Obtaining property by fraud or misrepresentation

6. Connecticut – Public Act 15-162 (cont.)
Other conduct requirements and restrictions (cont.)
Knowingly misapplying or recklessly applying loan payments
Knowingly or recklessly providing inaccurate information to credit bureau
Failing to report favorable and unfavorable payment histories to a nationally recognized credit bureau
Refusing to communicate with an authorized representative of the student loan borrower
Negligently making a false statement or knowingly and willfully omitting a material fact in a government report

7. Connecticut – Public Act 15-162 (cont.)
Other conduct requirements or restrictions (cont.)
Failing to comply with all applicable federal laws and regulations, including the Truth in Lending Act
Record retention
At least 2 years following final payment or assignment
Penalties for non-compliance
Various administrative remedies
Apparently no private right of action

8. Connecticut – Public Act 15-162 (cont.)
Effective date
Generally effective October 1, 2015
Licensing effective July 1, 2016
Conduct provisions effective July 1, 2016

9. California – Ch. 824, Statutes of 2016
Student loan ombudsman
Law is silent
Servicer licensing
Required to service “in this state”
Servicing definition tracks CFPB larger participant rule
Banks exempt; subsidiaries not specifically mentioned
Dispute resolution procedures
Acknowledge “qualified written request” within 5 business days
Respond within 30 business days (15-day extension possible)

10. California – Ch. 824, Statutes of 2016 (cont.)
Dispute resolution procedures (cont.)
No adverse credit reports for 60 days with payment QWR
Servicing transfer notices
At least 15 days before next required payment
Information must be transferred to new servicer within 45 days
Disclosure of repayment and loan forgiveness options
Must be provided on website (information or links)
Must be provided at least once a year in written correspondence (information) or by (links)

11. California – Ch. 824, Statutes of 2016 (cont.)
Other conduct requirements and restrictions
Employing scheme, device, or artifice to defraud or mislead (directly or indirectly)
Engaging in any unfair or deceptive practice toward any borrower or omitting any material information in connection with servicing
Misapplying loan payments
Failing to accurately report payment performance to at least one nationwide consumer reporting agency
Refusing to communicate with an authorized representative of the borrower
Negligently or intentionally making a false statement or knowingly and willfully omitting a material fact in a government report

12. California – Ch. 824, Statutes of 2016 (cont.)
Other conduct requirements and restrictions
Failing to accurately report payment histories to at least one nationwide consumer reporting agency
Refusing to communicate with an authorized representative of the student loan borrower
Negligently making a false statement or knowingly and willfully omitting a material fact in a government report
Record retention
At least 3 years after payment, sale, assignment or transfer
Penalties for non-compliance
Various administrative remedies
Apparently no private right of action

13. California – Ch. 824, Statutes of 2016 (cont.)
Effective date
Certain provisions authorizing conduct by the Commissioner are effective January 1, 2017
Licensing and other provisions are effective January 1, 2018

14. Washington, D.C. – Bill B21-0877 (Pending)
Student loan ombudsman
Designated by Commissioner of Department of Securities, Insurance and Banking
Duties include resolving and reporting on borrower complaints
Servicer licensing
Required to service loans to DC residents (borrower or cosigner)
Servicing is not defined
Banks exempt; subsidiaries not specifically mentioned
Licensing is administered by the Ombudsman

15. Washington, D.C. – Bill B21-0877 (Pending)
Dispute resolution procedures
Bill is silent
Servicing transfer notices
Disclosure of repayment and loan forgiveness options
Other conduct requirements and restrictions
Record retention
Penalties for non-compliance

16. Washington, D.C. – Bill B21-0877 (Pending)
Record retention
Bill is silent
Penalties for non-compliance
Effective following:
Approval by the Mayor
Thirty day period for Congressional review
Publication in the District of Columbia Register

17. Other Pending Bills Delaware – HB 349 Michigan – HB 5585; SB 0907
Minnesota – HF 3820
New Jersey – AB 1670
Rhode Island – H 7081
Virginia – HB 401; SB 604
Washington – SB 6610

18. State Regulatory Activities
Joint investigation of student loan servicer by CFPB, New York Department of Finance, and Attorneys General for New York and Massachusetts
State authorities being more aggressive; little coordination; largely focused on income-based repayment issues
Investigation began less than a year ago

19. Massachusetts Attorney General
Formed special student loan unit
Investigating:
The amount of time it takes for a servicer to process IBR applications
The method of communicating the decision to the consumer
Disclosures re: late fees, payment allocation, other rights
SCRA benefits and timeliness of application of benefits
Are payments being properly amortized

20. Massachusetts Attorney General
Pushing for new requirements?
For-profit schools must inform enrolled students of the potential to avoid repayment due to the borrower defense
Submit all IBR decisions to independent group for a “second look”

21. New York Regulatory Activities
New York Department of Financial Services
Being a little less aggressive than Massachusetts but conducting a broader investigation
Payment allocation is significant focus

22. Debt Settlement
Many states have debt settlement or debt management laws that should apply to student loan debt relief companies
Laws require licensing or bonding, prohibit the collection of advance fees or other upfront payments, and impose stringent disclosure requirements
Many state attorneys general now have investigative units that cover student loan fraud which is broadly defined
Illinois Attorney General has filed suit against seven different student loan debt relief companies, only one of which was located in-state
New Hampshire Banking Department previously entered into a consent order with one student loan debt relief company

23. Litigation Third party collections Credit reporting
Marketing/UDAP claims relating to value of program/other representations

24. Thank you! Panelists Stefanie H. Jackman John L. Culhane, Jr. Partner
Consumer Financial Services
Stefanie H. Jackman

25. Panelist – John L. Culhane, Jr.
Partner at Ballard Spahr and a member of the firm’s Consumer Financial Services, Mortgage Banking, Bank Regulation and Supervision, Higher Education, and Privacy and Data Security Groups as well as its Marketplace Lending Task Force, Fair Lending Task Force, TCPA Task Force, and Military Lending Act Task Force
Compliance practice emphasizes counseling clients on the development and implementation of innovative loan, leasing, and payment programs, and includes counseling on fair lending, servicing and collection issues
Regulatory practice includes preparing clients for banking agency and CFPB targeted fair lending and full spectrum compliance examinations as well as assisting in the defense of consumer class actions, attorney general investigations, and agency enforcement actions
Named a top consumer financial services lawyer by Chambers USA, 2015 & 2016
Charter member of the American College of Consumer Financial Services Lawyers
Former Chair of the Subcommittee on Fair Lending of the ABA Committee on Consumer Financial Services

26. Panelist – Stefanie H. Jackman
Partner in the Consumer Financial Services, Mortgage Banking, and Commercial Litigation Groups at Ballard Spahr
Focuses primarily on complex litigation and compliance in the area of consumer financial services and financial institutions law
Regularly counsels financial institutions on regulatory matters, advises them on compliance with consumer financial services laws, and defends them in both individual and class action lawsuits, as well as governmental enforcement actions before the CFPB and FTC
Assists clients in developing and implementing compliance systems and preparing for CFPB exams and investigatory proceedings
Member of Ballard Spahr’s Marketplace Lending, Collection Documentation, and Fair Lending Task Forces
Frequent author and speaker on issues relating to consumer financial services regulation and litigation
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