On October 12, in its monthly bulletin the California Department of Financial Protection and Innovation (CA DFPI) announced that final regulations to implement the Student Loan Servicing Act and the Student Loans Borrower Rights Law have been approved and will become effective Jan. 1, 2024. Among other things, the rules clarify that all education financing products, including income share agreements (ISAs) and installment contracts, are student loans, and servicers of all such products are covered by the Student Loan Servicing Act and must be licensed.
As reported here, on September 9, 2022, the CA DFPI published a notice of rulemaking action, proposing amendments to the Student Loan Servicing Act. In response to comments received to the original published rules, on January 6, the Commissioner of the CA DFPI modified the proposed rules. The modifications included, among other things revising the definition of “installment contract” to list the manner in which the money to be repaid may be lent, which will ensure that installment contracts fall within the definition, regardless of how the contract is structured. As discussed here, on March 6, in response to comments received to the modified rules, the CA DFPI issued a notice of second modifications to the proposed rules. The second round of modifications did not materially alter the scope of the proposed rules.
According to its monthly bulletin, the CA DFPI anticipates that the benefits from this rulemaking will include “protective benefits to student loan borrowers with education financing products, improved [CA DFPI] regulatory oversight of the servicer industry, and strengthened enforcement of the recent state laws regarding student loan servicing.”