On May 15, Maryland Governor Larry Hogan signed into law a bill that, among other things, establishes the role of Student Loan Ombudsman within the Office of the Commissioner of Financial Regulation and sets forth various duties related to that position.
Maryland SB 1068, titled the Financial Consumer Protection Act of 2018, represents a scaled down version of an attempt by state lawmakers to regulate student loan servicers. An earlier version of the bill contained language that would have created a licensing regime for servicers, similar to what the District of Columbia, California, Connecticut, Illinois, and Washington have enacted over the past couple of years. Instead, SB 1068 enacts the other key prong of such recent legislation: the creation of an ombudsman role to monitor student lending and servicing activity within the state.
Under the new law, the Student Loan Ombudsman is required to:
- Receive and review complaints from student loan borrowers;
- Attempt to resolve complaints by collaborating with higher education institutions, student loan servicers, and others, as specified;
- Compile and analyze complaint data (and, as specified, disclose that data);
- Help student loan borrowers understand their rights and responsibilities;
- Provide information to the public and others;
- Disseminate information about the availability of the ombudsman to address student loan concerns;
- Analyze and monitor the development and implementation of federal, State, and local laws, regulations, and policies on student loan borrowers;
- By October 1, 2019, establish a student loan borrower education course that includes educational presentations and material about student education loans;
- Make recommendations regarding statutory and regulatory methods to resolve borrower problems and concerns; and
- Make recommendations on necessary changes to Maryland law to ensure the student loan servicing industry is fair, transparent, and equitable, including whether licensing or registration of student loan servicers should be required in Maryland.
The last item on this list suggests that a licensing or registration requirement could be forthcoming. However, under the law as enacted, new obligations for student loan servicers are presently limited to requiring each student loan servicer operating in Maryland to (1) designate an individual to represent the servicer in communications with the ombudsman and (2) provide appropriate contact information for that designee to the ombudsman.
In addition to establishing the Student Loan Ombudsman role, SB 1068 contains a number of noteworthy changes to Maryland’s consumer finance statutes, including (1) expanding the definition of “unfair and deceptive trade practices” under the Maryland Consumer Protection Act (MCPA) to include “abusive” practices; (2) providing that unfair, abusive, or deceptive trade practices include violations of the federal Military Lending Act or the federal Servicemembers Civil Relief Act; (3) adding various provisions related to consumer lending, including raising the Maryland Consumer Loan Law’s licensing trigger from $6,000 to $25,000 (thus expanding the scope of the statute’s licensing requirement); (4) increasing the maximum civil penalties for violations of MCPA and several other financial licensing and regulatory laws; (5) allocating additional resources for enforcement of Maryland’s consumer protection laws; and (6) prohibiting consumer reporting agencies from charging for a placement, temporary lift, or removal of a security freeze.