Amid growing concerns over the federal government’s “hands off” approach to regulating the student loan business, New York Governor Andrew Cuomo released 3 NYCRR 409, a proposed regulation aimed at providing significant consumer protections for New York student loan borrowers, to the public for comment. The deadline for comment on the regulation is September 29.
Governor Andrew M. Cuomo released for public comment a new regulation (“Part 409”) aimed at providing significant consumer protections for New York student loan borrowers. The proposed rules, promulgated pursuant to Section 718 of the New York Banking Law (effective October 9, 2019), are of little surprise, given that Governor Cuomo and the Superintendent of the New York Department of Financial Services (“NYDFS”), Linda Lacewell, have been quite outspoken about their increasing concerns about the state of the student loan market in New York.
To further the NYDFS’ mission, Part 409 provides that, except as otherwise provided in New York laws and regulations, “every person engaged in the business of servicing student loans owed must be licensed by the [NYDFS] as a student loan servicer.”
For purposes of Part 409, “student loan servicer” means “a person engaged in the business of servicing student loans owed by one or more borrowers.” Further, Part 409 defines the term “student loan” as “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education.”
An entity is deemed to be “servicing” if it is:
Notably, “servicing” excludes “collecting, or attempting to collect, on a defaulted student loan for which no payment has been received for 270 days or more.”
Part 409 requires entities that “service” New York student loans to:
Part 409 is open for comment until September 29, 2019. Given the messaging from Governor Cuomo and the NYDFS surrounding the regulation of the New York student loan market and the fact that the NYDFS made its New York Student Loan Servicer license application available to entities engaging in “student loan servicing” through the Nationwide Multistate Licensing System & Registry on August 1, 2019, this may only be New York’s first step into regulating student loan servicers.