STATE OF NEW YORK ________________________________________________________________________ 3155--A 2023-2024 Regular Sessions IN ASSEMBLY February 2, 2023 ___________ Introduced by M. of A. ZEBROWSKI, SIMON, FORREST, WALLACE, EACHUS, SIMONE, LEVENBERG, BURDICK -- read once and referred to the Committee on Consumer Affairs and Protection -- recommitted to the Committee on Consumer Protection in accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the general business law and the civil practice law and rules, in relation to protecting private education loan borrowers and cosigners The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The general business law is amended by adding a new article 2 42 to read as follows: 3 ARTICLE 42 4 PRIVATE EDUCATION LOAN PROTECTIONS 5 Section 1100. Definitions. 6 1101. Applicability. 7 1102. Exempt organizations. 8 1103. Provisions applicable to cosigners. 9 1104. Prohibition on acceleration of payments on private educa- 10 tion loans. 11 1105. Required communications from creditors and debt collec- 12 tors. 13 1106. Required information to be provided by creditors and debt 14 collectors. 15 1107. Enforcement. 16 1108. Rules and regulations. 17 § 1100. Definitions. As used in this article: 18 1. "Private education loan" means an extension of credit that: 19 (a) is not made, insured, or guaranteed under title IV of the Higher 20 Education Act of 1965 (20 U.S.C. 1070 et seq.); EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD01638-05-4A. 3155--A 2 1 (b) is extended to a consumer expressly, in whole or in part, for 2 higher education expenses, regardless of whether the loan is provided by 3 the educational institution that the student attends; 4 (c) does not include open-end credit or any loan that is secured by 5 real property or a dwelling; and 6 (d) does not include an extension of credit in which the covered 7 educational institution is the creditor if: 8 (i) the term of the extension of credit is ninety days or less; or 9 (ii) an interest rate or finance charge will not be applied to the 10 credit balance and the term of the extension of credit is one year or 11 less, even if the credit is payable in more than four installments. 12 2. "Private education lender", except as exempted under this article, 13 means: 14 (a) any person or entity engaged in the business of securing, making, 15 or extending private education loans; or 16 (b) any holder of a private education loan. 17 3. "Borrower" or "private education loan borrower" means a person who 18 has received or agreed to pay a private education loan for such person's 19 own educational expenses. 20 4. "Cosigner" (a) means: 21 (i) any individual who is liable for the obligation of another without 22 compensation, regardless of how designated in the contract or instrument 23 with respect to that obligation, including an obligation under a private 24 education loan extended to consolidate a borrower's pre-existing private 25 education loans; and 26 (ii) includes any person the signature of which is requested as condi- 27 tion to grant credit or to forbear on collection; 28 (b) does not include a spouse of an individual described in subpara- 29 graph (i) of paragraph (a) of this subdivision, the signature of whom is 30 needed to perfect the security interest in a loan. 31 5. "Original creditor" means the private education lender identified 32 in a promissory note, loan agreement, or loan contract entered into with 33 a private education loan borrower or cosigner. 34 6. "Creditor" means: 35 (a) the original creditor, where ownership of a private education loan 36 debt has not been sold, assigned, or transferred; 37 (b) the person or entity that owned the private education loan debt at 38 the time the debt became delinquent or defaulted, even if that person or 39 entity did not originate the private education loan, and where such a 40 debt has not subsequently been sold, transferred or assigned; or 41 (c) a person or entity that purchased a delinquent or defaulted 42 private education loan debt for collection purposes, whether it collects 43 the debt itself, hires a third party for collection, or hires an attor- 44 ney for collection litigation. 45 7. "Debt collector" means any person who regularly collects or 46 attempts to collect, directly or indirectly, consumer debts originally 47 owed or due or asserted to be owed or due another. The term does not 48 include any officer or employee of a creditor who, in the name of the 49 creditor, collects debts for such creditor, but it does include any 50 creditor who, in the process of collecting its own debts, uses any name 51 other than its own which would indicate that a third person is collect- 52 ing or attempting to collect such debts. 53 8. "Higher education expense" means any expense arising from higher 54 education, as defined in section two of the education law, regardless of 55 whether the higher education institution is accredited within New York 56 state.A. 3155--A 3 1 § 1101. Applicability. 1. Any person or entity that enters into a 2 contract or subcontract with a private education lender or servicer to 3 perform the servicing of a private education loan must fulfill the obli- 4 gations of the private education lender under this article. 5 2. Any private education lender as described in subdivision two of 6 section eleven hundred of this article be jointly and severally liable 7 for the actions of the entity or person in fulfilling the obligations of 8 the private educational lender or servicer under this article. 9 § 1102. Exempt organizations. The following shall be exempt from the 10 provisions of this article only to the extent that state regulation is 11 preempted by federal law: 12 1. Any banking organization, foreign banking corporation, national 13 bank, federal savings association, federal credit union, or any bank, 14 trust company, savings bank, savings and loan association, or credit 15 union organized under the laws of any other state; and 16 2. Any subsidiary of such entities set forth in subdivision one of 17 this section. 18 § 1103. Provisions applicable to cosigners. 1. (a) Prior to the origi- 19 nation of a private education loan, the private education lender shall 20 provide to all cosigner applicants information about the rights and 21 responsibilities of the cosigner of the loan, including: 22 (i) information about how the private education lender will furnish 23 information about the cosigner's private education loan obligation to 24 credit reporting agencies; 25 (ii) information about how the cosigner will be notified if the 26 private education loan becomes delinquent, including how the cosigner 27 can cure the delinquency in order to avoid negative credit furnishing 28 and loss of cosigner release eligibility; and 29 (iii) information about eligibility for release of the cosigner's 30 obligation on the private education loan, including number of on-time 31 payments and any other criteria required to approve the release of 32 cosigner from the loan obligation. 33 (b) Lenders shall send borrowers and cosigners annual written notices 34 containing information about cosigner release, including criteria the 35 lender requires to approve the release of cosigner from the loan obli- 36 gation and the process for applying for cosigner release. 37 (c) Once the borrower has met the applicable consecutive on-time 38 payment requirement to be eligible for cosigner release, the lender 39 shall send the borrower and cosigner a written notification by U.S. mail 40 and by electronic mail, where a borrower has elected to receive elec- 41 tronic communications from the lender, informing the borrower and cosig- 42 ner that such person has met the applicable consecutive, on-time 43 payments requirement to be eligible for cosigner release. The notifica- 44 tion shall also include information about any additional criteria to 45 qualify for cosigner release, and the procedure to apply for cosigner 46 release. 47 (d) Lenders shall provide written notice within fifteen days to any 48 borrower who applies for cosigner release, but whose application is 49 incomplete. The written notice must include a description of the infor- 50 mation needed to consider the application complete and the date by which 51 the applicant should furnish the missing information. 52 (e) After a borrower submits a complete application for cosigner 53 release, within thirty days, the lender shall send the borrower and 54 cosigner a written notice that informs the borrower and cosigner whether 55 the cosigner release application has been approved or denied. If the 56 lender denies a request for cosigner release, the lender shall informA. 3155--A 4 1 the borrower of such person's right to request all documents and infor- 2 mation used in the determination, including the credit score threshold 3 used by the lender, the borrower's consumer report, the borrower's cred- 4 it score, and any other documents specific to the borrower. The lender 5 must also provide any adverse action notices required under applicable 6 federal law if the denial is based in whole or in part on any informa- 7 tion contained in a consumer report. 8 2. (a) In response to any written or oral request for cosigner 9 release, lenders shall send the information described in paragraph (b) 10 of subdivision one of this section. 11 (b) Lenders shall not impose any restrictions that may permanently bar 12 a borrower from qualifying for cosigner release, including restricting 13 the number of times a borrower may apply for cosigner release. 14 (c) Lenders shall not impose any negative consequences on any borrower 15 or cosigner during the sixty days following the issuance of the notice 16 required under paragraph (d) of subdivision one of this section, or 17 until the lender makes a final determination about a borrower's cosigner 18 release application. For the purpose of this paragraph, "negative conse- 19 quences" includes, but is not limited to, the imposition of additional 20 eligibility criteria, negative credit reporting, lost eligibility for 21 cosigner release, late fees, interest capitalization, or other financial 22 injury. 23 (d) Lenders shall not require greater than twelve consecutive, on-time 24 payments as criteria to apply for cosigner release. Any borrower who has 25 paid the equivalent of twelve months of principal and interest payments 26 within any twelve-month period will be considered to have satisfied the 27 consecutive, on-time payment requirement, even if the borrower has not 28 made payments monthly during the twelve-month period. 29 (e) If a borrower or cosigner requests a change that restarts the 30 count of consecutive, on-time payments required for cosigner release, 31 the lender shall notify the borrower and cosigner in writing within ten 32 days of the impact of such an arrangement and provide the borrower or 33 cosigner the right to withdraw or reverse the request to avoid such 34 impact. 35 (f) The borrower has the right to request an appeal of a lender's 36 determination to deny the cosigner release application within ninety 37 days of receiving the lender's determination, and the lender shall 38 permit such borrower to submit additional documentation evidencing that 39 the borrower has the ability, willingness, and stability to handle such 40 person's payment obligations. The borrower may request review of the 41 cosigner release determination by another employee. The lender shall 42 inform the borrower of this right in a clear and conspicuous manner on 43 the notice denying the cosigner release application. 44 (g) A lender must establish and maintain a comprehensive record 45 management system reasonably designed to ensure the accuracy, integrity, 46 and completeness of data and other information about cosigner release 47 applications. This system shall include the number of cosigner release 48 applications received, the approval and denial rate, and the primary 49 reasons for any denial. 50 (h) If a cosigner has a total and permanent disability, as determined 51 by any federal agency, state agency, or physician or doctor of osteopa- 52 thy legally authorized to practice in the state in which the cosigner 53 resides, the lender shall release the cosigner from the cosigner's obli- 54 gation to repay the loan upon receiving a notification of the cosigner's 55 total and permanent disability. The lender shall not require a newA. 3155--A 5 1 cosigner to be added to the loan after the original cosigner has been 2 released from the loan. 3 3. (a) A lender shall provide a cosigner of a private education loan 4 with access to all documents or records related to the cosigned private 5 education loan that are available to the borrower; 6 (b) If a lender provides electronic access to documents and records 7 for a borrower, it shall provide equivalent electronic access to the 8 cosigner; and 9 (c) Upon receiving notice from the borrower or cosigner, the lender 10 shall redact the contact information of the other party. 11 § 1104. Prohibition on acceleration of payments on private education 12 loans. 1. Except as provided in subdivision two of this section, a 13 private education loan executed after the effective date of this article 14 may not include a provision that permits the private educational lender 15 to accelerate, in whole or in part, payments on the private education 16 loan. 17 2. A private education loan may include a provision that permits 18 acceleration of the loan in cases of payment default. 19 3. A lender shall not place any loan or account into default or accel- 20 erate a loan for any reason, other than for failure to pay. 21 4. (a) In the event of the death of a cosigner, a lender shall not 22 attempt to collect against the cosigner's estate, other than for failure 23 to pay. 24 (b) Upon receiving notification of the death or bankruptcy of a cosig- 25 ner, when the loan is not more than sixty days delinquent at the time of 26 the notification, a lender shall not change any terms or benefits under 27 the promissory note, repayment schedule, repayment terms, or monthly 28 payment amount or any other provision associated with the loan. 29 (c) A lender shall not place any loan or account into default or 30 accelerate a loan for any reason, other than for failure to pay. 31 § 1105. Required communications from creditors and debt collectors. 32 In addition to any other information required under applicable federal 33 or state law, a creditor or debt collector shall provide, in writing, in 34 the first debt collection communication with the private education loan 35 borrower or cosigner, or within five days thereafter, and at any other 36 time the borrower or cosigner requests such documentation: 37 1. The name of the current owner of the private education loan debt; 38 2. The original creditor's name at the time of origination and, if 39 different, at the time of sale of the loan, if applicable; 40 3. The original creditor's account number used to identify the private 41 education loan debt at the time of sale, if applicable; 42 4. The total outstanding amount owed at the time of default or the 43 amount due to bring the loan current if the loan is delinquent, but not 44 yet in default; 45 5. A schedule of all transactions credited or debited to the private 46 education loan account; 47 6. A copy of all pages of the contract, application or other documents 48 stating all terms and conditions applicable to the private education 49 loan and evidencing the private education loan borrower's or cosigner's 50 liability for the private education loan; and 51 7. A clear and conspicuous statement disclosing that the borrower or 52 cosigner has a right to request all information possessed by the credi- 53 tor related to the private education loan debt, including, but not 54 limited to the information included in section eleven hundred six of 55 this article.A. 3155--A 6 1 § 1106. Required information to be provided by creditors and debt 2 collectors. 1. A creditor or debt collector may not collect or attempt 3 to collect a private education loan debt unless the creditor or debt 4 collector possesses the following: 5 (a) The name of the owner of the private education loan; 6 (b) The original creditor's name at the time of sale of the loan or 7 default, if applicable; 8 (c) The original creditor's account number used to identify the 9 private education loan at the time of sale or default, if the original 10 creditor used an account number to identify the private education loan 11 at the time of sale or default; 12 (d) The amount due at the time of sale, or at default, or, if the loan 13 is delinquent, to bring the loan current; 14 (e) A schedule of all transactions credited or debited to the private 15 education loan account; 16 (f) An itemization of interest and fees, if any, claimed to be owed 17 and whether those were imposed by the original creditor or any subse- 18 quent owners of the private education loan; 19 (g) The date that the private education loan was incurred; 20 (h) A billing statement or other account record indicating the date of 21 the first partial payment and/or the first day that a payment was 22 missed, whichever is earlier; 23 (i) A billing statement or other account record indicating the date of 24 the last payment made by the borrower or cosigner, if applicable; 25 (j) Any payments, settlement, or financial remuneration of any kind 26 paid to the creditor by a guarantor, cosigner, or surety, and the amount 27 of payment received; 28 (k) A copy of the self-certification form and any other "needs analy- 29 sis" conducted by the original creditor prior to origination of the 30 loan; 31 (l) A log of all collection attempts made in the previous twelve 32 months including date and time of all calls and written communications; 33 (m) Copies of all written settlement offers sent in the last twelve 34 months, or, in the alternative, a statement that the creditor has not 35 attempted to settle or otherwise renegotiate the debt prior to suit; 36 (n) Copies of all collection letters sent to the borrower and cosigner 37 since inception of the loan; 38 (o) Documentation establishing that the creditor is the owner of the 39 specific individual private education loan at issue. If the private 40 education loan was assigned more than once, the creditor must possess 41 each assignment or other writing evidencing the transfer of ownership of 42 the specific individual private education loan to establish an unbroken 43 chain of ownership, beginning with the original creditor to the first 44 subsequent creditor and each additional creditor. Each assignment or 45 other writing evidencing transfer of ownership or the right to collect 46 must contain the original creditor's account number (redacted for secu- 47 rity purposes to show only the last four digits) of the private educa- 48 tion loan purchased or otherwise assigned, the date of purchase and 49 assignment, and must clearly show the borrower's, and if applicable, 50 cosigner's correct name associated with the original account number. The 51 assignment or other writing attached shall be that by which the creditor 52 or other assignee acquired the private education loan, not a document 53 prepared for litigation or collection purposes; 54 (p) A copy of all pages of the contract, application or other docu- 55 ments evidencing the private education loan borrower's, and if applica-A. 3155--A 7 1 ble, cosigner's liability for the private education loan, stating all 2 terms and conditions applicable to the private education loan; and 3 (q) A signed affidavit or affidavits from each of the previous owners 4 of the private education loan regarding when the previous owner acceler- 5 ated the loan from delinquency status to default status, or if applica- 6 ble, a statement that no such acceleration occurred. 7 2. Upon written or oral request from a borrower or cosigner for any 8 information that a creditor or debt collector is required to possess 9 pursuant to subdivision one of this section, a creditor or debt collec- 10 tor shall send the requested information to the borrower or cosigner 11 within fifteen days of receipt of the request. 12 § 1107. Enforcement. 1. All private education lenders, creditors and 13 debt collectors shall comply with the provisions of this article. 14 2. Whenever it appears to the attorney general, either upon complaint 15 or otherwise, that any person or persons, have suffered damage as a 16 result of a violation of this article by a private education lender, 17 creditor, or debt collector covered by these provisions, the attorney 18 general may bring an action or special proceeding in the name and on 19 behalf of the people of the state of New York to enjoin any violation of 20 this article, to recover or obtain any of the following: 21 (a) actual damages; 22 (b) correction of any inaccurate, negative reporting by the lender, 23 creditor, or debt collector to any credit reporting agency; 24 (c) injunctive relief; and 25 (d) any other relief that the court deems proper. 26 § 1108. Rules and regulations. In addition to such powers as may 27 otherwise be prescribed by this chapter, the attorney general is hereby 28 authorized and empowered to promulgate such rules and regulations as may 29 in the judgment of the attorney general be consistent with the purposes 30 of this article, or appropriate for the effective administration of this 31 article, including, but not limited to: 32 (a) such rules and regulations in connection with the activities of 33 private education lenders, creditors, and debt collectors as may be 34 necessary and appropriate for the protection of borrowers in this state; 35 (b) such rules and regulations as may be necessary and appropriate to 36 define unfair, deceptive or abusive acts or practices in connection with 37 the activities of private education lenders, creditors, and debt collec- 38 tors; 39 (c) such rules and regulations as may define the terms used in this 40 article and as may be necessary and appropriate to interpret and imple- 41 ment the provisions of this article; and 42 (d) such rules and regulations as may be necessary for the enforcement 43 of this article. 44 § 2. Subdivision (q-1) of section 105 of the civil practice law and 45 rules, as added by chapter 593 of the laws of 2021, is amended to read 46 as follows: 47 (q-1) Original creditor. The term "original creditor" means the entity 48 that owned a consumer credit account at the date of default giving rise 49 to a cause of action, except that if the consumer credit account is a 50 private education loan, as defined in subdivision one of section eleven 51 hundred of the general business law, "original creditor" means the 52 private education lender identified in a promissory note, loan agree- 53 ment, or loan contract entered into with a private education loan 54 borrower or cosigner. 55 § 3. Severability. If any clause, sentence, paragraph, subdivision, 56 section or part of this act shall be adjudged by any court of competentA. 3155--A 8 1 jurisdiction to be invalid, such judgment shall not affect, impair, or 2 invalidate the remainder thereof, but shall be confined in its operation 3 to the clause, sentence, paragraph, subdivision, section or part thereof 4 directly involved in the controversy in which such judgment shall have 5 been rendered. It is hereby declared to be the intent of the legislature 6 that this act would have been enacted even if such invalid provisions 7 had not been included herein. 8 § 4. This act shall take effect on the sixtieth day after it shall 9 have become a law.