“It’s crucial that we do all we can to protect student loan borrowers,” said United States Senator Reed (Democrat, Rhode Island). “Strengthening student loan servicing and protections for private student loan borrowers, including in the growing refinancing market, and providing greater transparency and accountability for campus-based banking products beyond just credit cards are important steps that will ensure that the many abuses that have taken place against student loan borrowers won’t happen again. Malign actions by financial institutions must be detected and prevented for consumers everywhere, and students should and must be able to enjoy basic protections as they pay back their student loans.”
Reed, along with Senator Dick Durbin (Democract, Illinois) introduced a “key amendment to improve consumer protections for federal and private student loans. The amendment includes a Student Loan Borrower Bill of Rights to improve federal and private student loan servicing, restoration of private student loan dischargeability in bankruptcy, protections for service members and veterans, and protections from excessive wage garnishment for struggling borrowers.”
Reed and Durbin hope to include the amendment to the so-called Economic Growth, Regulatory Relief, and Consumer Protection Act, legislation that Reed says will water down the Dodd-Frank financial reform law.
“If we can take up the issue to make it easier for banks in America, we can spare a few minutes to debate whether or not we can make it easier for student borrowers to survive when the student debts that they face are stopping them from moving forward in their lives – massive debt that stops them from getting married, buying a home, a car, starting a family, that’s the reality for many families across America,” said Senator Durbin. “I hope my colleagues will join me. It would be terrific if we could allow on the floor of the Senate those speeches and a vote on that critical issue.”
- Establishes disclosure requirements and protections for borrowers when a postsecondary education loan is sold, transferred, or reassigned.
- Establishes disclosure requirements and protections when the interest rate or other key terms of the loan change.
- Establishes a standard for application of payments, unless otherwise directed by the borrower.
- Prohibits a servicer from recommending default in connection with the process of qualifying for an alternative repayment plan.
- Protects borrowers from rampant late fees being assessed by a servicer.
- Requires servicers to respond in a timely manner to borrower inquiries.
- Requires servicers to establish special points of contact for high-risk borrowers.
- Requires servicers to establish a Service member and Veteran Liaison to be responsible for answering inquiries from service members and veterans, and has special training on service member and veterans benefits under the Servicemember Civil Relief Act.
- Establishes a right for borrowers to request and have online access to information related to payment history, interest rate, loan terms, and pay off balance as well as original documents.
- Requires certain key information be disclosed to borrowers by servicers as part of monthly billing statements.
- Makes clear that protections do not preempt state laws where those state laws provide stronger consumer protections.
- Prohibits the use of mandatory pre-dispute arbitration clauses by servicers.
On Wednesday, Senator Reed voiced his opposition to the overall bill on the Senate floor:
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