On August 30, the California Department of Financial Protection and Innovation (CA DFPI) published a notice of rulemaking action, proposing amendments to the Student Loan Servicing Act.
According to the CA DFPI, when the Student Loan Servicing Act first became effective in 2017, student loans contained traditional student loans, defined in the proposed rules as federal student loans, and private student loans offered by traditional lenders, such as banks and credit unions. In the last five years, education financing products, such as income share agreements and installment contracts, have emerged. The proposed rules clarify that such products are student loans, and servicers of such products are covered by the Student Loan Servicing Act and must be licensed.
The proposed amendments’ stated objectives include:
- Clarifying that all education financing products are student loans within the definition of student loan in the Student Loan Servicing Act and the Student Loans: Borrower Rights law;
- Clarifying that servicers of all education financing products must be licensed as student loan servicers under the Student Loan Servicing Act;
- Clarifying that servicers of all education financing products are subject to and must comply with all laws applicable to student loan servicers;
- Defining terms used in the rules relating to education financing products;
- Specifying that servicers of all education financing products must submit an annual report to the department regarding the volume and dollar amount of all education financing products serviced during the previous year on the form specified by the CA DFPI; and
- Revising certain existing regulations to remove requirements deemed unnecessary, based on the CA DFPI’s experience administering the Student Loan Servicing Act, to reduce regulatory burden.
The notice triggers a 60-day comment period (ending October 28) for interested parties to submit comments.