Starting January 1, 2021, Californian have more rights when it comes to student loan collection and repayment. the Student Borrower Bill of Rights (SBBOR). This is one of the most expansive modifications to California consumer’s rights in a long time. You can check out the original bill at California Civil Code §1788.100
Who in California does this law apply to?
This act applies to both borrowers and co-borrowers. There are additional protections for borrowers with disabilities, those that serve in the military, those that are above the age of 55, and public service workers (teachers, fireman, law enforcement, health professional plus many more). It regulates student loan servicers. They are entities that receive your payments and apply them to your account on student loans. The SBBOR also applies to the refinance of student loans.
Servicers can not mislead you
Servicers are generally prohibited from abusive acts or practices. They can not interfere with a borrower’s ability to understand the terms and conditions of a loan. Servicers cannot defraud or mislead a borrower or misapply payments. Servicers cannot mislead borrowers that are in the military, public service employees, older borrowers or those with disabilities about any available programs or protections.
Student loan servicers must be timely
Servicers are now required by law to post and process student loan payments in a timely manner. This requires that the servicers payment processing policies shall be disclosed and readily accessible. They must ask the borrower how to apply an overpayment. Absent contradictory instructions, servicers now have an obligation to apply payments in the best financial interest of a student loan borrower. This would require applying payments to the loan with the highest interest rate on the borrower’s account.
There now exists a requirement for student loan servicers to timely process its paperwork. . This will be very helpful for borrowers who are seeking repayment assistance.
Oral Request & Qualified Written Request
Student loan servicers now have to respond to disputes and other requests for information from borrowers either orally or in writing. The SBBOR defines a qualified request as a request made over the phone that is specific in nature as to the payment, credit reporting, or other problem with the student loan. A qualified written request or QWR is the same request made in writing via US Mail Certified Mail – Return Receipt Requested or including email describing an error or trying to obtain payment history.
A student loan servicer must respond to a QWR within 30 business days. They must provide documents related to your dispute or questions. They will need to also clearly explain the actions they are taking to either correct, modify, or otherwise substantiate their position. Student loan servicers must maintain policies and procedures to escalate disputes by borrowers when a borrower disagrees with the resolution.
Transfers of Student Loans
If a student loan is transferred the servicer must notify the borrower of the new servicer 15 days before the borrower is required to send in a payment. .
California also has the Educational Debt Collection Practices Act (“EDCPA”) which prohibits schools from withholding transcripts for a current or former student on the grounds that the student owes a debt. (Civ. Code §1788.90 et seq.).
Enforcement of the SBBOR
California consumers can sue their student loan servicer for violation their rights. They can recover actual damages which shall be no less than $500 per Plaintiff, per violation (not per case), punitive damages, and attorney’s fees. If the violation substantially interfered with a borrower’s right to an alternative payment arrangement or another financial benefit then the court shall award treble actual damages of no less than $1500 per Plaintiff, per violation.
Prior to filing an action under the SBBOR a consumer must provide written notice to the servicer 45 days prior to filing the action. This notice must be sent via certified or registered mail, return receipt requested to the address on file with the Department of Financial Protection and Innovation or to their principal place of business in California.