The New York state legislature is currently considering a pair of companion bills which would impose detailed notice and records requirements upon student loan servicers. New York Senate bill S5136B, which was passed by the New York Senate earlier this year, and New York House bill A6226B, which is currently under consideration with the New York Legislature’s Consumer Affairs and Protection Committee, would require “creditors and debt collectors” to provide certain written disclosures to borrowers or cosigners of private education loans at the time of the first collection communication (or within five days after the first communication). Among the disclosures that would be required by the bills are:
- The name of the current owner of the private education loan debt;
- The name of the original creditor and name at the time of sale of the loan, if applicable;
- The original creditor’s account number used to identify the loan debt at time of sale, if applicable;
- The total amount owed at the time of default or delinquency;
- A schedule of all transactions;
- A copy of the contract, application, or other documents containing the applicable terms and conditions of the loan; and
- A “clear and conspicuous statement” stating that the borrower or cosigner has the right to request all information possessed by the creditor relating to the loan.
These requirements are similar to, but more comprehensive than, the notice requirements imposed upon third-party debt collectors and debt buyers by N.Y. Comp. Codes R. & Regs. tit. 23, § 1.2(b). The existing regulation requires third party debt collectors to provide written notice at the time of the initial communication with the borrower (or within five days after the first communication) containing the name of the original creditor and an itemized accounting of the debt. However, unlike the student loan servicing bills under consideration, it does not require a copy of the contract to be provided to the borrower or a statement regarding the right to request information.
In addition to the notice requirements, the student loan servicing bills would require the creditor or debt collector to hold certain information at the time of any collection attempts, including but not limited to:
- The contract, application, or other documentation establishing the identity of the borrower;
- Documents sufficient to establish the identity of the creditor, including documentation evidencing assignments;
- The amount due at the time of sale;
- Copies of all collection letters sent to the borrower;
- A log of all collection attempts;
- Documentation establishing an unbroken chain of ownership from the original creditor to the current owner of the loan at issue;
- A signed affidavit from each of the previous owners of the private education debt if the previous owner accelerated the loan from delinquency state to default status, or alternatively, a statement that no such acceleration occurred; and
- A copy of the self-certification form and any other “needs analysis” conducted by the original creditor prior to origination of the loan.
The bills would allow harmed borrowers or cosigners to bring private actions, expressly including class action suits, to recover actual damages (with a statutory minimum recovery of $500 per person, per violation) and punitive damages. Additionally, the bills would amend the state civil practice law and rules to require creditors to demonstrate compliance with the new requirements in order to bring any civil action arising from a private education loan debt.