The Nevada Legislature recently passed Assembly Bill 332 (“AB 332”), which amends Nev. Rev. Stat. Title 55 relating to Banks and Related Organizations to add a new chapter regulating Private Education Lenders and Student Loan Servicers.  The provisions of SB 322 will become effective on January 1, 2024. 

AB 332 exempts the following entities from its requirements:

  • Banks;
  • Savings and loan associations;
  • Savings banks;
  • Thrift companies;
  • Credit unions;
  • The Nevada System of Higher Education;
  • The Western Interstate Commission for Higher Education; and
  • Any wholly owned subsidiaries of the above.

Pursuant to Section 15 of AB 332, any person or entity responsible for the servicing of any student education loan to any student loan borrower may be considered a Student Loan Servicer.  Section 15 requires Student Loan Servicers to obtain a license before engaging in student loan servicing.

Potential licensees must submit an application containing:

  • A financial statement prepared by a certified public accountant;
  • A $1,000 nonrefundable licensing fee;
  • An $800 nonrefundable investigation fee;
  • Any other information requested by the Commissioner;
  • A surety bond in an amount to be determined by the Commissioner;
  • The social security numbers of the applicant if the applicant is a natural persons or of each control person if the applicant is not a natural person; and
  • The statement prescribed by the Division of Welfare and Supportive Services of the Departments of Health Human Services pursuant to Nev. Rev. Stat. § 425.520.

Pursuant to Section 19 of AB 332, the Commissioner will grant a Student Loan Servicer a license if the applicant can demonstrate that:

  • The applicant’s financial condition is sound;
  • The applicant’s business will be conducted honestly, fairly, equitably, carefully, and efficiently within the purposes and intent of SB 332 and in the manner commanding the confidence and trust of the community;
  • The applicant is properly qualified and of good character;
  • No person on behalf of the applicant knowingly has made any incorrect statement of material fact in the application or has otherwise omitted to state any material fact necessary to give the Commissioner any information lawfully required by the Commissioner;
  • The applicant has paid the license fee and the investigation fee and has submitted the surety bond; and
  • The applicant has otherwise met any other requirement set forth by the Commissioner in any regulations adopted pursuant to AB 332.

Finally, AB 332 creates specified standards for Private Education Lenders.  Section 7 of AB 332 provides that any person or entity engaged in the business of securing, making, extending, or holding private education loans may be considered a Private Education Lender.  A Private Education Lender must adhere to the specified standards, including:

  • Complying with notice and cosigner release requirements relating to borrowers and cosigners;
  • Refraining from including provisions in loans made after January 1, 2024 which allow the private education lender to accelerate payments except in cases of default
  • Refraining from accelerating payments on loans made before January 1, 2024 unless the loan explicitly authorizes an acceleration and only for the reasons stated in the relevant note or agreement;
  • Refraining from placing any private education loan or account into default or accelerating a private education loan while a private education loan borrower is seeking a loan modification or enrollment in a flexible repayment plan until 90 days following the private education loan borrower’s default;
  • Releasing and refraining from collecting from any cosigner of a private education loan if notified of the total and permanent disability of a private education loan borrower or cosigner;
  • Complying with disclosures and procedural requirements regarding refinancing and flexible repayment of private education loans;
  • Refraining from engaging in any unfair, deceptive, or abuses acts or practices and making false, misleading, or deceptive statements;
  • Refraining from making a private education loan secured by wages or other compensation for services earned or to be earned; and
  • Complying with all relevant recordkeeping requirements.

Importantly, we note that an entity engaged in any business activities covered in AB 332 should consult the bill’s full text to determine how such changes will affect its business operations.