Bill Text: NJ S4011 | 2024-2025 | Regular Session | Introduced
Bill Title: Requires registration of postsecondary education debt creditors; establishes protections for borrowers.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced) 2025-01-14 - Introduced in the Senate, Referred to Senate Higher Education Committee [S4011 Detail]
Download: New_Jersey-2024-S4011-Introduced.html
Sponsored by:
Senator ANDREW ZWICKER
District 16 (Hunterdon, Mercer, Middlesex and Somerset)
Senator JOSEPH P. CRYAN
District 20 (Union)
SYNOPSIS
Requires registration of postsecondary education debt creditors; establishes protections for borrowers.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning postsecondary education debt creditors and supplementing P.L.2019, c.200 (C.17:16ZZ-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Commissioner" means the Commissioner of Banking and Insurance.
"Cosigner" means:
(1) any individual who is liable for the obligation of another without compensation, regardless of how the individual is designated in the contract or instrument with respect to that obligation, including a postsecondary education debt extended to consolidate a borrower's pre-existing postsecondary education debt; and
(2) shall include any person whose signature is requested as a condition to grant credit or to forbear on collection.
As used in this act, "cosigner" shall not include a spouse of an individual described in paragraph (1), the signature of whom is needed to perfect the security interest in a loan.
"Debt collector" means a person who regularly collects or attempts to collect, directly or indirectly, consumer debts originally owed or due or asserted to be owed or due another. The term shall not include an officer or employee of a postsecondary education debt creditor who, in the name of the postsecondary education debt creditor, collects debts for that postsecondary education debt creditor, but it shall include a postsecondary education debt creditor who, in the process of collecting its own debt, uses a name other than its own that would indicate that a third person is collecting or attempting to collect the debt.
"Department" means the Department of Banking and Insurance.
"Original creditor" means the postsecondary education debt creditor identified in a promissory note, postsecondary education debt agreement, or loan contract entered into with a postsecondary education debt borrower or cosigner.
"Postsecondary education debt borrower" or "borrower" means any resident of this State who has received or agreed to pay for postsecondary education debt for the borrower's own educational expenses.
"Postsecondary education debt" means an extension of credit, contractual or otherwise, contingent or absolute, that:
(1) is not made, insured, or guaranteed under Title IV of the "Higher Education Act of 1965" (20 U.S.C. s.1070 et seq.); and
(2) is extended to a borrower expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the credit is provided by the provider of postsecondary education that the student attends.
"Postsecondary education debt creditor" means any entity engaged in the business of securing, originating, or extending postsecondary education debt, or any purchaser, assignee, or holder of such debt. "Postsecondary education debt creditor" shall not include the following persons, only to the extent that State regulation is preempted by federal law:
(1) any bank, savings bank, savings and loan association, or credit union;
(2) any wholly owned subsidiary of a bank or credit union; and
(3) any operating subsidiary where each owner of the operating subsidiary is wholly owned by the same bank or credit union. "Total and permanent disability" means the condition of an individual who:
(1) has been determined by the United States Secretary of Veterans Affairs to be unemployable due to a service-connected disability; or
(2) is eligible for Social Security Disability Insurance or Supplemental Security Income and whose next scheduled disability review will be five to seven years or more from the date of the individual's last Social Security Administration disability determination; or
(3) is unable to work and earn money or attend school by reason of any medically determinable physical or mental impairment, as certified by a doctor of medicine, a doctor of osteopathy, or a nurse practitioner who is legally licensed to practice in the United States, that can be expected to result in death, has lasted for a continuous period of not less than 60 months, or can be expected to last for a continuous period of not less than 60 months.
An individual shall not be considered "totally and permanently disabled" under this act on the basis of a condition that existed at the time the individual applied for the postsecondary education debt, unless the individual's condition has deteriorated later so as to render the individual totally and permanently disabled.
2. a. No postsecondary education debt creditor shall engage in the business of postsecondary education debt in this State without first registering with the commissioner, and re-registering annually thereafter, as applicable, as provided in this section and in accordance with any requirements established by the commissioner, who shall establish and collect a registration and re-registration fee. The commissioner may require registration and re-registration using the Nationwide Multistate Licensing System and Registry, and any costs associated with such registry shall be paid by the registrant. The commissioner may establish alternative registration and re-registration procedures and fees for postsecondary education debt creditors that are also providers of postsecondary education.
b. A postsecondary education debt creditor that secures, originates, or extends postsecondary education debt to a borrower shall provide the commissioner, at the time of registration and at the time of any re-registration thereafter, with the following documents and information about its postsecondary education debt activity for borrowers who reside in the State, as applicable:
(1) a list of all schools attended by borrowers who received postsecondary education debt from the postsecondary education debt creditor and whose postsecondary education debt is still outstanding, including postsecondary education debt to refinance an existing debt;
(2) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers who received postsecondary education debt from the postsecondary education debt creditor;
(3) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers associated with each school identified in paragraph (1) of this subsection;
(4) the total dollar amount and total number of new postsecondary education debts provided to borrowers in the prior fiscal year;
(5) the total outstanding dollar amount and total number of new postsecondary education debts provided at each school identified under paragraph (1) of this subsection in the prior fiscal year;
(6) the rate of default for borrowers who obtained debt from the postsecondary education debt creditor;
(7) the rate of default for borrowers who obtained debt from the postsecondary education debt creditor associated with each school identified under paragraph (1) of this subsection;
(8) the eligibility criteria to receive the lowest advertised starting interest rate and the percentage of applicants who receive the lowest advertised starting interest rate in the prior fiscal year;
(9) the range of initial interest rates provided by the postsecondary education debt creditor to borrowers, and the percentage of borrowers who received each rate identified in the prior fiscal year;
(10) the total dollar amount and total number of new postsecondary education debts provided to borrowers with a cosigner in the prior fiscal year;
(11) the total dollar amount and the total number of new postsecondary education debts provided to borrowers used to refinance prior postsecondary education debt or federal student loans in the prior fiscal year;
(12) the total dollar amount and the total number of postsecondary education debts for which the postsecondary education debt creditor had sued to collect from a borrower in the prior fiscal year;
(13) the name and address of the postsecondary education debt creditor and any officer, director, partner, or owner of a controlling interest in the postsecondary education debt creditor;
(14) a copy of any model promissory note, agreement, contract, or other instrument used by the postsecondary education debt creditor in the prior fiscal year to substantiate that a borrower owes a new postsecondary education debt; and
(15) any other information considered necessary by the commissioner to assess the total size and status of the postsecondary education debt market and the well-being of borrowers.
c. A postsecondary education debt creditor that purchases, assumes, or holds postsecondary debt of borrowers who reside in the State shall provide the commissioner, at the time of registration and at the time of any re-registration thereafter, with the following documents and information associated with such debt, as applicable:
(1) a list of all schools attended by borrowers who used, for attendance, any outstanding postsecondary education debt purchased, assumed, or held by the postsecondary creditor;
(2) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers and purchased, assumed, or held by the postsecondary education debt creditor;
(3) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers that have been purchased, assumed, or held by the postsecondary education debt creditor associated with each school identified under paragraph (1) of this subsection;
(4) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers and newly purchased, assumed, or held by the postsecondary education debt creditor in the prior fiscal year;
(5) the total outstanding dollar amount and the total number of postsecondary education debts owed by borrowers newly purchased, assumed, or held by the postsecondary education debt creditor in the prior fiscal year and associated with each school identified under paragraph (1) of this subsection;
(6) the rate of default for postsecondary education debt purchased, assumed, or held by the postsecondary education debt creditor;
(7) the rate of default for postsecondary education debt purchased, assumed, or held by the postsecondary education debt creditor associated with each school identified under paragraph (1) of this subsection;
(8) the total outstanding dollar amount and the total number of postsecondary education debts provided to borrowers with a cosigner;
(9) the total outstanding dollar amount and the total number of postsecondary education debts used by borrowers to refinance prior postsecondary education debt or federal student loans;
(10) the total dollar amount and the total number of postsecondary education debts for which the postsecondary education debt creditor had sued to collect from borrowers in the prior fiscal year;
(11) the name and address of the postsecondary education student creditor and any officer, director, partner, or owner of a controlling interest of the postsecondary education debt creditor; and
(12) any other information considered necessary by the commissioner to assess the total size and status of the student debt market and the well-being of borrowers.
d. The commissioner may establish a process for reporting the information required under subsections b. and c. of this section to avoid the duplicative reporting of information by postsecondary education debt creditors to the commissioner if the postsecondary education debt creditor is required to report the information required under subsections b. and c. of this section to the commissioner under another provision of state or federal law. The commissioner may further establish an alternative process for reporting the information required under subsections b. and c. of this section for postsecondary education debt creditors that are providers of postsecondary education.
e. On or before July 1, 2026, and each July 1 thereafter, the commissioner shall post on the department's Internet website the following information about each postsecondary education debt creditor registered in this State:
(1) the name, address, telephone number, and website for all registered postsecondary education debt creditors;
(2) the information required under subsections b. and c. of this section; and
(3) a copy of each model promissory note, agreement, contract, or other instrument used by the postsecondary education debt creditor during the previous year to substantiate that postsecondary education debt has been extended to a borrower or that a borrower owes a debt to the postsecondary education debt creditor.
f. The commissioner may impose a civil penalty not exceeding $25,000 on any entity for a violation of this section. Each violation of this section, including any order, rule or regulation made or issued pursuant to the act, shall constitute a separate offense. Additionally, each violation which constitutes a knowing violation shall be a crime of the third degree.
g. The commissioner may order that any entity who has been found to have knowingly violated any provision of this section, or of the rules and regulations issued pursuant to this section, be barred for a term not exceeding 10 years from acting as a postsecondary education debt creditor, or a stockholder, or an officer, director, partner or other owner, or an employee of a postsecondary education debt creditor. The commissioner may order the rescission of postsecondary education debt made by a person who fails to register pursuant to this section. A violation of an order shall be a crime of the third degree.
3. a. Prior to the extension of postsecondary education debt that requires a cosigner, a postsecondary education debt creditor shall deliver the following information to the cosigner:
(1) how the postsecondary education debt obligation shall appear on the cosigner's credit;
(2) how the cosigner shall be notified if the postsecondary education debt becomes delinquent, including how the cosigner can cure the delinquency in order to avoid negative credit furnishing and loss of cosigner release eligibility; and
(3) for postsecondary education debt that provides a cosigner release option, the conditions for eligibility for release of the cosigner's obligation on the postsecondary education debt, including the number of on-time payments and any other criteria required to approve the release of cosigner from the postsecondary education debt obligation.
b. For any postsecondary education debt that obligates a cosigner and provides for cosigner release, a postsecondary education debt creditor shall provide the borrower and the cosigner an annual written or electronic notice containing clear and conspicuous information about cosigner release, including the criteria the postsecondary education debt creditor requires to approve the release of the cosigner from the postsecondary education debt obligation and the process for applying for cosigner release. The criteria may include minimum income or credit, or both income and credit, requirements that the postsecondary education debt creditor requires the borrower to satisfy for cosigner release.
c. If the borrower has met the applicable payment requirement to be eligible for cosigner release, the postsecondary education debt creditor shall send the borrower and the cosigner a written notification by mail or by electronic mail, where a borrower or cosigner has elected to receive electronic communications from the postsecondary education debt creditor, informing the borrower and cosigner that the payment requirement to be eligible for cosigner release has been met. The notification shall also include information about any additional criteria to qualify for cosigner release, and the procedure to apply for cosigner release.
d. A postsecondary education debt creditor shall provide written notice to a borrower who applies for cosigner release, but whose application is incomplete. The written notice shall include a description of the information needed to consider the application complete and the date by which the applicant shall furnish the missing information.
e. Within 30 days after a borrower submits a completed application for cosigner release, the postsecondary education debt creditor shall send the borrower and cosigner a written notice that informs the borrower and cosigner whether the cosigner release application has been approved or denied. If the postsecondary education debt creditor denies a request for cosigner release, the borrower may request any documents or information used in the determination, including, but not limited to, the credit score threshold used by the postsecondary education debt creditor and any other documents specific to the borrower in the possession of the postsecondary education debt creditor or the postsecondary education debt creditor's third-party contractors. The postsecondary education debt creditor shall also provide any adverse action notices required under applicable federal law if the denial is based in whole or in part on any information contained in a consumer report.
4. a. If the postsecondary education debt creditor provides a cosigner release option, in response to a written or oral request for cosigner release, a postsecondary education debt creditor shall provide the information described in subsection b. of section 3 of this act.
b. If a postsecondary education debt creditor provides a cosigner release option, a postsecondary education debt creditor shall not impose any restriction that permanently bars a borrower from qualifying for cosigner release, including restricting the number of times a borrower may apply for cosigner release.
c. A postsecondary education debt creditor shall not impose any negative consequences on any cosigner during the 60 days following the issuance of the notice required pursuant to subsection d. of section 3 of this act, or until the postsecondary education debt creditor makes a final determination about a borrower's cosigner release application. For the purpose of this subsection, "negative consequences" include, but are not limited to, the imposition of additional eligibility criteria, negative credit reporting, lost eligibility for cosigner release, late fees, interest capitalization, or other financial injury.
d. For any postsecondary education debt executed after the effective date of this act, a postsecondary education debt creditor shall not require greater than 12 consecutive, on-time payments of principal and interest as the initial criteria for the borrower to submit an application for cosigner release.
e. If a borrower or cosigner requests a change in terms that restarts the count of consecutive, on-time payments required for cosigner release, the postsecondary education debt creditor shall notify the borrower and cosigner in writing, by mail, or by electronic mail, if a borrower or cosigner has elected to receive electronic communications from the postsecondary education debt creditor, of the impact of the change and provide the borrower or cosigner the right to withdraw or reverse the request to avoid that impact.
f. A borrower shall have the right to request an appeal of a postsecondary education debt creditor's determination to deny a request for cosigner release, and the postsecondary education debt creditor shall permit the borrower to submit additional documentation evidencing the borrower's ability, willingness, and stability to meet the payment obligations. The borrower may request a review of the cosigner release determination by another employee.
g. A postsecondary education debt creditor shall establish and maintain a comprehensive record management system reasonably designed to ensure the accuracy, integrity, and completeness of data and other information about cosigner release applications and to ensure compliance with applicable state and federal laws, including but not limited to the "Equal Credit Opportunity Act," 15 U.S.C. s.1691 et seq., and the "Fair Credit Reporting Act," 15 U.S.C. s.1681 et seq. This system shall include the number of cosigner release applications received, the approval and denial rate, and the primary reasons for any denial.
h. (1) A postsecondary education debt creditor shall provide a cosigner with access to all documents or records related to the cosigned postsecondary education debt that are available to the borrower.
(2) If a postsecondary education debt creditor provides electronic access to documents and records for a borrower, it shall provide equivalent electronic access to the cosigner.
5. a. (1) A postsecondary education debt executed after the effective date of this act shall not include a provision that permits the postsecondary education debt creditor to accelerate, in whole or in part, payments on the postsecondary education debt, except in cases of payment default. A postsecondary education debt creditor shall not place any postsecondary education debt or account into default or accelerate postsecondary education debt for any reason, other than for payment default.
(2) For any postsecondary education debt executed prior to the effective date of this act, the postsecondary education debt creditor shall accelerate payments only if the promissory note or debt agreement explicitly authorizes an acceleration and only for the reasons stated in the note or agreement.
b. (1) Any postsecondary education debt executed after the effective date of this act shall not include a provision that permits the postsecondary education debt creditor to attempt to collect against the cosigner's estate, other than for payment default.
(2) Upon receiving notification of the death or bankruptcy of a cosigner, when the debt is not more than 60 days delinquent at the time of the notification, the postsecondary education debt creditor shall not change any terms or benefits under the promissory note, repayment schedule, repayment terms, or monthly payment amount or any other provision associated with the postsecondary debt education.
c. A postsecondary education debt creditor shall not place any postsecondary education debt or account into default or accelerate postsecondary education debt while a borrower is seeking a debt modification or enrollment in a flexible repayment plan, except that a postsecondary education debt creditor may place postsecondary education debt or account into default or accelerate postsecondary education debt for payment default 90 days following the borrower's default.
6. a. A postsecondary education debt creditor, upon determination of the total and permanent disability of a borrower, shall discharge the liability of the borrower and any cosigner on the postsecondary education debt.
b. A postsecondary education debt creditor, upon determination of the total and permanent disability of a cosigner, shall release that individual cosigner from the obligations of the cosigner under the postsecondary education debt.
c. A postsecondary education debt creditor shall notify a borrower and cosigner for postsecondary education debt if either a cosigner or borrower is released from the obligations of the postsecondary education debt under this section, within 30 days of the release.
d. Any postsecondary education debt creditor that extends postsecondary education debt shall provide the borrower an option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the postsecondary education debt product in the event of the total and permanent disability of the borrower.
e. (1) In the event a cosigner is released from the obligations of postsecondary education debt pursuant to this section, the postsecondary education debt creditor shall not require the borrower to obtain another cosigner on the postsecondary education debt obligation.
(2) A postsecondary education debt creditor shall not declare a default or accelerate the debt against the borrower on the sole basis of the release of the cosigner from the postsecondary education debt obligation.
f. After making the determination described in subsection a. of this section, the postsecondary education debt creditor shall not:
(1) attempt to collect on the outstanding liability of the borrower or cosigner; or
(2) monitor the disability status of the borrower at any point after the date of discharge.
7. a. Prior to offering a person postsecondary education debt that is being used to refinance existing postsecondary education debt, a postsecondary education debt creditor shall provide the person a disclosure that benefits and protections applicable to the existing postsecondary education debt may be lost due to the refinancing.
The information provided pursuant to this subsection shall be provided on a one-page information sheet in a 12-point font and shall be written in simple, clear, understandable and easily readable language as provided in P.L.1980, c.125 (C.56:12-1 et seq.).
b. If a postsecondary education debt creditor offers any borrower flexible repayment options in connection with postsecondary education debt, those flexible repayment options shall be made available to all borrowers of postsecondary education debt by the postsecondary education debt creditor. A postsecondary education debt creditor shall:
(1) provide on its website a description of any alternative repayment options offered by the postsecondary education debt creditor for postsecondary education debt;
(2) establish policies and procedures and implement them consistently in order to facilitate the evaluation of flexible repayment option requests, including providing accurate information regarding any alternative repayment options that may be available to the borrower through the promissory note or that may have been marketed to the borrower through marketing materials; and
(3) consistently present and offer postsecondary education debt repayment options to borrowers with similar financial circumstances, if the postsecondary education debt creditor offers repayment options.
c. If a postsecondary education debt creditor does not offer the same interest rate to all borrowers, the postsecondary education debt creditor shall publish the criteria used to determine the rate for which a borrower is eligible in all places where the interest rate is published.
8. No postsecondary education debt creditor shall:
a. offer any postsecondary education debt that is not in conformity with this act, or that is in violation of any other State or federal law;
b. engage in any unfair, deceptive, or abusive act or practice; or
c. make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, in any manner, any statement or representation which is false, misleading or deceptive.
9. a. In addition to any other information required under applicable federal or State law, a debt collector attempting to collect a postsecondary education debt shall provide in the first debt collection communication with the borrower and at any other time the borrower requests this documentation, as applicable:
(1) the name of the owner of the postsecondary education debt;
(2) the original creditor's name;
(3) the name of the postsecondary creditor that owned the postsecondary education debt at the time of default;
(4) the account number used to identify the postsecondary education debt at the time of default and, if different, the account number used by the original creditor to identify the postsecondary education debt;
(5) the amount due at the time of default;
(6) a schedule of all transactions credited or debited to the postsecondary education debt account;
(7) a copy of all pages of the contract, application or other documents evidencing the borrower's liability for the postsecondary education debt, stating all terms and conditions applicable to the postsecondary education debt; and
(8) a clear and conspicuous statement disclosing that the borrower has a right to request all information possessed by the postsecondary education debt creditor related to the defaulted postsecondary education debt, including, but not limited to the required information described in subsection b. of this section.
b. A postsecondary education debt creditor or debt collector shall not collect or attempt to collect a postsecondary education debt unless the postsecondary education debt creditor or debt collector possesses the following documents and information, as applicable:
(1) the name of the owner of the postsecondary education debt;
(2) the original creditor's name;
(3) the postsecondary creditor's name at the time of default;
(4) the account number used to identify the postsecondary education debt at the time of default and, if different, the account number used by the original creditor to identify the postsecondary education debt;
(5) the amount due at default;
(6) a schedule of all transactions credited or debited to the postsecondary education debt account;
(7) an itemization of interest and fees, if any, claimed to be owed and whether those were imposed by the original creditor or any subsequent owners of the postsecondary education debt product;
(8) the date that the postsecondary education debt was incurred;
(9) a billing statement or other account record indicating the date of the first partial payment or the first day that a payment was missed, whichever is earlier;
(10) a billing statement or other account record indicating the date of the last payment made by the borrower, if applicable;
(11) any payments, settlement, or financial remuneration of any kind paid to the postsecondary education debt creditor by a guarantor, co-signer, or surety, and the amount of payment received;
(12) a log of all collection attempts made in the last 12 months including date and time of all calls and letters;
(13) copies of all settlement letters made in the last 12 months, or, in the alternative, a statement that the postsecondary education debt creditor has not attempted to settle or otherwise renegotiate the debt prior to suit;
(14) a copy of all pages of the contract or other documents evidencing the postsecondary education debt borrower's liability for the postsecondary education debt, stating all terms and conditions applicable to the postsecondary education debt; and
(15) documentation establishing that the postsecondary education debt creditor is the owner of the specific individual postsecondary education debt at issue. If the postsecondary education debt was assigned more than once, the postsecondary education debt creditor shall possess each assignment or other writing evidencing the transfer of ownership of the specific individual postsecondary education debt to establish an unbroken chain of ownership, beginning with the original creditor to the first subsequent postsecondary education debt creditor and each additional postsecondary education debt creditor. Each assignment or other writing evidencing transfer of ownership or the right to collect shall contain the original creditor's account number, redacted for security purposes to show only the last four digits, of the postsecondary education debt purchased or otherwise assigned, the date of purchase and assignment, and shall clearly show the borrower's correct name associated with the original account number. The assignment or other writing attached shall be that by which the postsecondary education debt creditor or other assignee that purchased, acquired, or held the postsecondary education debt, not a document prepared for litigation or collection purposes.
c. Failure by a postsecondary education debt creditor or debt collector to produce to a borrower, within 30 days of a verbal or written request, any documentation described in subsection a. or b. of this section shall be a violation of this act.
10. a. Upon a payment default on a postsecondary education debt by a borrower, and before a postsecondary education debt creditor may accelerate the maturity of the postsecondary education debt or commence a legal action against the borrower, the postsecondary education debt creditor shall provide to the borrower a notice of intention to accelerate the postsecondary education debt. The postsecondary education debt creditor shall provide the notice at least 30 days, but not more than 180 days, in advance of the action, and shall provide a copy of the notice to the department at the same time it is provided to the borrower.
b. A notice provided pursuant to this section shall contain a certification that the postsecondary education debt creditor possesses all of the information required pursuant to subsection b. of section 9 of this act.
11. a. An action to enter a judgment against a borrower shall be commenced within six years of the date the borrower failed to make a payment.
b. A postsecondary education debt creditor or debt collector commencing a legal action against a borrower shall attach the following documentation and information to the complaint filed in a court of competent jurisdiction:
(1) a copy of the notice of intention provided pursuant to section 10 of this act, including the information a postsecondary education debt creditor is required to retain pursuant to subsection b. of section 9 of this act;
(2) the date of the first partial or missed payment;
(3) the date of the last payment, if applicable;
(4) a copy of any self-certification or needs analysis conducted by the original creditor prior to origination of the postsecondary education debt;
(5) a statement as to whether the postsecondary education debt creditor is willing to renegotiate the terms of the debt; and
(6) a statement as to whether the debt is eligible for any flexible repayment option.
Failure to attach the information required by this subsection shall be an affirmative defense.
c. No court shall enter a judgment on a postsecondary education debt obligation if the postsecondary education debt creditor or debt collector does not comply with the requirements of this section.
12. a. A borrower or cosigner who suffers damage as a result of a violation of this act may bring an action in a court of competent jurisdiction to recover:
(1) an order setting aside or vacating any default judgment entered against the person;
(2) a judgment in favor of the borrower or cosigner;
(3) actual damages, but in no case shall the total award of damages be less than $500;
(4) an order enjoining the unlawful methods, acts, or practices;
(5) restitution of money and property;
(6) attorney's fees and costs; and
(7) any other relief that the court deems proper.
b. In addition to any other remedies provided by this act or otherwise provided by law, whenever it is proven by a preponderance of the evidence that a postsecondary education debt creditor or debt collector has filed information with the court that is required pursuant to the act that is false, the court shall award treble damages to the borrower or cosigner, but in no case shall the total award of damages be less than $1,500.
13. The Department of Banking and Insurance shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act.
14. This act shall take
effect on the 180th day next following enactment.
STATEMENT
This bill requires the registration of postsecondary education debt creditors and establishes protections for borrowers.
The bill prohibits a postsecondary education debt creditor from extending postsecondary education debt to a New Jersey resident without first registering with the Commissioner of Banking and Insurance and with the Nationwide Multistate Licensing System and Registry. Postsecondary education debt creditors are required to provide the commissioner, at the time of registration and not less than once per year thereafter, certain information about the entities and the postsecondary education debt that they provide. The commissioner is required to post on the department's website information about postsecondary education debt creditors registered in the State. The bill also requires postsecondary education debt creditors to post on their websites a copy of each model promissory note, agreement, contract or other instrument used by the postsecondary education debt creditor to substantiate postsecondary education debt. The bill provides that the commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of the registration provisions of the bill. Each violation which constitutes a knowing violation is a crime of the third degree.
The bill requires postsecondary education debt creditors to deliver certain information to a cosigner related to impacts on the cosigner in certain circumstances, prior to the extension of postsecondary education debt that requires a cosigner. For any postsecondary education debt that obligates a cosigner and provides for cosigner release, a postsecondary education debt creditor is required to provide the borrower and the cosigner an annual written or electronic notice containing clear and conspicuous information about cosigner release. Under the bill, if the borrower has met the applicable payment requirement to be eligible for cosigner release, the postsecondary education debt creditor must send the borrower and the cosigner a notification informing them that the payments requirement to be eligible for cosigner release has been met.
The bill requires a postsecondary education debt creditor to provide written notice to a borrower who applies for cosigner release, but whose application is incomplete. Within 30 days after a borrower submits a completed application for cosigner release, the postsecondary education debt creditor is required to send the borrower and cosigner a written notice that informs them whether the cosigner release application has been approved or denied.
The bill prohibits a postsecondary education debt creditor from imposing any restriction that permanently bars a borrower from qualifying for cosigner release. For any postsecondary education debt executed after the effective date of the bill, a postsecondary education debt creditor is prohibited from requiring greater than 12 consecutive, on-time payments of principal and interest as criteria to apply for cosigner release. This codifies the standard currently used by major student loan companies, such as Sallie Mae Bank. Under the bill, if a borrower or cosigner requests a change in terms that restarts the count of consecutive, on-time payments, the postsecondary education debt creditor must notify the borrower and cosigner in writing, by mail, or by electronic mail, of the impact of the change and provide the borrower or cosigner the right to withdraw or reverse the request. The bill provides that a borrower has the right to request an appeal of a postsecondary education debt creditor determination to deny a request for cosigner release, and the postsecondary education debt creditor is required to permit the borrower to submit certain additional documentation. The bill requires postsecondary education debt creditors to establish and maintain a comprehensive record management system.
The bill prohibits postsecondary education debt executed after the effective date of the bill from including a provision that permits the postsecondary education debt creditor to accelerate, in whole or in part, payments on the postsecondary education debt, except in cases of payment default. The bill prohibits a postsecondary education debt executed after the effective date of the bill from including a provision that permits a postsecondary education debt creditor to attempt to collect against the cosigner's estate, other than for payment default. Upon receiving notification of the death or bankruptcy of a cosigner, when the postsecondary education debt is not more than 60 days delinquent at the time of the notification, the postsecondary education debt creditor may not change any terms or benefits under the promissory note, repayment schedule, repayment terms, or monthly payment amount or any other debt provision.
Under the bill, a postsecondary education debt creditor, upon determination of the total and permanent disability of a borrower or cosigner, is required to release the borrower or cosigner from their obligations under postsecondary education debt, as is the case with federal student loans. Upon determination of the total and permanent disability of a cosigner, a postsecondary education debt creditor is required to release that individual cosigner from the obligations of the cosigner. The bill requires postsecondary education debt creditors to notify borrowers and cosigners if a cosigner or borrower is released from the obligations of the postsecondary education debt, within 30 days of the release. The bill requires postsecondary education debt creditors that extend postsecondary education debt to provide the borrower the option to designate an individual to have the legal authority to act on behalf of the borrower with respect to the postsecondary education debt in the event of the total and permanent disability of the borrower. In the event a cosigner is released from the obligations of a postsecondary education debt, a postsecondary education debt creditor may not require the borrower to obtain another cosigner on the debt obligation. The bill provides that postsecondary education debt creditors may not declare a default or accelerate the debt against the borrower on the sole basis of the release of the cosigner from the postsecondary education debt. After making the determination of the total and permanent disability of a borrower, a postsecondary education debt creditor may not attempt to collect on the outstanding liability of the borrower or cosigner or monitor the disability status of the borrower after the date of discharge.
The bill requires the postsecondary education debt creditor to deliver a statement that benefits and protections applicable to existing postsecondary education debt may be lost due to refinancing before offering a person a postsecondary education debt that is being used to refinance an existing postsecondary education debt. If a postsecondary education debt creditor offers any borrower flexible repayment options in connection with a postsecondary education debt, those flexible repayment options must be made available to all borrowers of the postsecondary education debt creditor. The bill requires postsecondary education debt creditors to publish the criteria used to determine borrower interest rates in all places where the interest rate is published, if the postsecondary education debt creditor does not offer the same interest rate to all borrowers.
The bill provides that a postsecondary education debt creditor may not: offer any postsecondary education debt that is not in conformity with the bill, or that is in violation of any other State or federal law; engage in any unfair, deceptive, or abusive act or practice; or make, advertise, print, display, publish, distribute, electronically transmit, telecast or broadcast, in any manner, any statement or representation which is false, misleading or deceptive.
The bill provides that a postsecondary education debt creditor or debt collector attempting to collect a postsecondary education debt must provide certain documentation related to the debt in the first debt collection communication with the borrower and at any other time the borrower requests the documentation. The bill also prohibits postsecondary education debt creditors or debt collector from collecting or attempting to collect a postsecondary education debt unless the postsecondary education debt creditor or debt collector possesses certain information and documentation related to the debt.
Following a payment default on postsecondary education debt by a borrower, and before a postsecondary education debt creditor may accelerate the maturity of the postsecondary education debt or commence a legal action against the borrower, a postsecondary education debt creditor is required to provide to the borrower a notice of intention to accelerate the postsecondary education debt. The postsecondary education debt creditor must provide the notice at least 30 days, but not more than 180 days, in advance of the action, and must provide a copy of the notice to the department at the same time it is provided to the borrower.
The bill provides that an action to enter a default judgment against a borrower must be commenced within six years of the date the borrower failed to make a payment. The bill requires a postsecondary education debt creditor seeking to commence legal action against a borrower to attach certain documentation and information to a complaint filed in a court of competent jurisdiction. If a postsecondary education debt creditor fails to comply with the filing requirements of the bill, a borrower may bring an action, including a counterclaim, against the postsecondary education debt creditor to recover or obtain certain relief and damages.
The bill also provides that a borrower or cosigner who suffers damage as a result of a violation may bring an action in a court of competent jurisdiction to recover certain relief and damages.
