2020 California Code
Civil Code - CIV
DIVISION 3 - OBLIGATIONS
PART 4 - OBLIGATIONS ARISING FROM PARTICULAR TRANSACTIONS
TITLE 1.6C.10 - Student Loans: Borrower Rights
CHAPTER 2 - Setting Clear Rules of the Road for the Student Loan Industry
Section 1788.102.
Except to the extent that this section is inconsistent with any provision of federal law or regulation, and then only to the extent of the inconsistency, a student loan servicer shall do all of the following:
(a) Post and process student loan payments in a timely manner pursuant to the servicer’s established payment processing policies that shall be disclosed to and readily accessible by borrowers and credit student loan payments in a timely manner in accordance with the following:
(1) A payment received on or before 11:59 p.m. on the date on which that payment is due, in the amount, manner, and location indicated by the person engaged in student loan servicing, shall be credited as effective on the date on which the payment was received by the person engaged in student loan servicing in this state. A person engaged in student loan servicing in this state shall treat a payment received from the borrower on the borrower’s due date as an “on-time” payment.
(2) If a payment is made by check, credit the payment on the date the check was received by the student loan servicer regardless of the date of processing. A borrower’s online account shall reflect payments made within three business days of the date of payment unless payment is made by check and contains no information identifying to which account or loan the payment should be credited. In the event the student loan servicer receives a paper check with no information identifying to which account or loan the payment should be credited, the student loan servicer shall determine, within 10 business days, to which account and loan the payment should be credited. When the servicer determines to which account and loan the payment should be credited, the servicer shall credit the payment as of the date the payment was received by the servicer and update the borrower’s online account within one business day.
(b) If a person engaged in servicing a student loan makes a material change in the mailing address, office, or procedures for handling borrower payments, and that change causes a material delay in the crediting of a borrower payment made during the 60-day period following the date on which that change took effect, the person engaged in servicing the student loan shall not impose on the borrower any negative consequences related to that material change, including negative credit reporting, lost eligibility for a borrower benefit, late fees, interest capitalization, or other financial injury.
(c) (1) Inquire of a borrower how to apply an overpayment to a student loan. A borrower’s direction on how to apply an overpayment to a student loan shall be effective with respect to future overpayments during the term of a student loan until the borrower provides a different direction.
(2) (A) In the absence of a direction provided by a borrower pursuant to paragraph (1), allocate an overpayment on a student loan account in a manner that is in the best financial interest of a student loan borrower.
(B) As used in this paragraph, “best financial interest of a student loan borrower” means reducing the total cost of the student loan, including principal balance, interest, and fees.
(3) A student loan servicer shall be considered to meet the requirements of paragraph (2) if the servicer allocates the overpayment to the loan with the highest interest rate on the borrower’s student loan account, unless the borrower specifies otherwise.
(d) (1) Except as provided in federal law or required by a student loan agreement, comply with a direction provided by a borrower as to how to allocate a partial payment to a student loan.
(2) In the absence of a direction provided by a borrower pursuant to paragraph (1) of this subdivision, allocate a partial payment in a manner that minimizes late fees and negative credit reporting.
(3) A student loan servicer shall be considered to have satisfied paragraph (2) if, when there are multiple loans on a borrower’s student loan account at an equal stage of delinquency, the student loan servicer allocates partial payments to satisfy as many loans as possible on a borrower’s student loan account.
(e) (1) If a student loan servicer imposes a fee on a borrower for a past due student loan payment, that fee shall be reasonable and proportional to the total costs incurred as a result of the late payment by a borrower, and shall not exceed 6 percent of any amount past due.
(2) A student loan servicer shall not impose a minimum late fee. For purposes of this paragraph, “minimum late fee” includes any fee that is not assessed as a percentage of any amount past due.
(f) Diligently oversee its service providers. For purposes of this subdivision, “diligently oversee its service providers” includes maintaining policies and procedures to oversee compliance by third-party service providers engaged in any aspect of student loan servicing. Student loan servicers have joint and several liability for the conduct of their service providers for any act or practice that violates this title.
(g) (1) Timely process its paperwork, consistent with existing federal requirements, including, but not limited to, ensuring that customer service personnel have received both of the following:
(A) Appropriate training about the handling of paperwork.
(B) Access to necessary information about forms and applications that are in process, have been approved, or have been denied.
(2) The requirements of this subdivision include ensuring that customer service personnel have access to applications for income-driven repayment plans and other forms required to access benefits and protections for federal student loans, as described in Section 1070 and following of Title 20 of the United States Code.
(h) Except as required by a student loan agreement, all records about a borrower’s account shall be maintained for the period of time during which a person performs student loan servicing for a borrower’s account and for a minimum of three years after the loan serviced has been paid in full, assigned to collection, or the servicing rights have been transferred.
(i) Treat a qualified request as if it were a qualified written request and comply with subdivision (t) with respect to that qualified request.
(j) Maintain policies and procedures permitting a borrower who is dissatisfied with the outcome of an initial qualified request to escalate the borrower’s concern to a supervisor.
(k) (1) Protect borrowers from any negative consequences that are directly related to the issue identified in a borrower’s qualified request or qualified written request until that request has been resolved. For purposes of this subdivision, “negative consequences” include, but are not limited to, negative credit reporting, lost eligibility for a borrower benefit, late fees, interest capitalization, or other financial injury.
(2) Notwithstanding paragraph (1), after receipt of a qualified request or qualified written request related to a dispute on a borrower’s payment on a student loan, a student loan servicer shall not, for 60 days, furnish information to a consumer reporting agency regarding a payment that is the subject of the qualified request or the qualified written request.
(l) Protect borrowers from any negative consequences stemming from a sale, assignment, transfer, system conversion, or payment made by the borrower to the original student loan servicer consistent with the original student loan servicer’s policy. For purposes of this subdivision, “negative consequences” include, but are not limited to, any of the following:
(1) Negative credit reporting.
(2) The imposition of late fees not required by the promissory note.
(3) Loss of or denial of eligibility for any benefit or protection established under federal law or included in a loan contract.
(m) If the sale, assignment, or other transfer of the servicing of a student loan results in a change in the identity of the party to whom the borrower is required to send payments or direct any communications concerning the student loan, the student loan servicer shall notify the borrower in writing at least 15 days before the borrower is required to send a payment on the student loan of all of the following:
(1) The identity of the new student loan servicer and the number of the license, issued by the commissioner, of the new student loan servicer.
(2) The name and address of the new student loan servicer to whom subsequent payments or communications are required to be sent.
(3) The telephone numbers and internet websites of the new student loan servicer.
(4) The effective date of the sale, assignment, or transfer.
(5) The date on which the current student loan servicer will stop accepting payments on the borrower’s student loan.
(6) The date on which the new student loan servicer will begin accepting payments on the borrower’s student loan.
(n) Ensure all necessary information regarding a borrower, a borrower’s account, and a borrower’s student loan accompanies a loan when it transfers to a new student loan servicer within 45 calendar days of the effective date of the sale, assignment, or transfer. For purposes of this subdivision, “necessary information” shall include, at minimum, all of the following:
(1) A schedule of all transactions credited or debited to the student loan account.
(2) A copy of the promissory note for the student loan.
(3) Any notes created by student loan servicer’s personnel reflecting communications with the borrower about the student loan account.
(4) A report of the data fields relating to the borrower’s student loan account created by the student loan servicer’s electronic systems in connection with servicing practices.
(5) Copies or electronic records of any information or documents provided by the borrower to the student loan servicer.
(6) Usable data fields with information necessary to assess qualification for forgiveness, including public service loan forgiveness, if applicable.
(7) Any information necessary to compile a payment history.
(o) Provide specialized training for any customer service personnel that advises military borrowers about student loan repayment benefits and protections.
(p) Provide specialized training for any customer service personnel that advises borrowers working in public service about student loan repayment benefits and protections.
(q) Provide specialized training for any customer service personnel that advises older borrowers about risks specifically applicable to older borrowers to ensure that, once identified, older borrowers are informed about student loan repayment benefits and protections, including disability discharge programs for private and federal loans, if applicable, and, to the extent an older borrower serves as cosigner, about cosigner release provisions in private student loan contracts.
(r) Provide specialized training for any customer service personnel that advises borrowers with disabilities about student loan repayment benefits and protections, including disability discharge programs for private and federal loans. Under no circumstances shall a person engage in any unfair or deceptive practice toward any borrower with a disability or misrepresent or omit any material information in connection with the servicing of a student loan owed by a borrower with a disability. For purposes of this subdivision, “misrepresent or omit any material information” includes, but is not limited to, misrepresenting or omitting any of the following:
(1) The availability of any program or protection specific to borrowers with disabilities or applicable to those borrowers.
(2) The amount, nature, or terms of any fee or payment due or claimed to be due on a student loan.
(3) The terms and conditions of the student loan agreement.
(4) The borrower’s obligations under the student loan.
(s) Respond within 10 business days to communications from the Student Loan Ombudsman, established pursuant to Chapter 4 (commencing with Section 1788.104), or within a shorter, reasonable time as the Student Loan Ombudsman may request in that person’s communication.
(t) (1) Respond to a qualified written request by acknowledging receipt of the request within 10 business days and within 30 business days, provide information relating to the request and, if applicable, either the action the student loan servicer will take to correct the account or an explanation for the position that the borrower’s account is correct.
(2) The 30-day period described in paragraph (1) may be extended for not more than 15 days if, before the end of the 30-day period, the student loan servicer notifies the borrower of the extension and the reason for the delay in responding.
(Added by Stats. 2020, Ch. 154, Sec. 2. (AB 376) Effective January 1, 2021.)
