by The Collection’s Agitator
Tribe, last month, we touched on California’s updated consumer debt collection regulations impacting original creditors, subsequent debt holders, debt buyers, and debt collection attorneys. Some laws are already in effect, while others become effective in 2022.
The California Consumer Financial Protection Law (CCFPL),
established the Department of Financial Protection and Innovation, which in turn created the Debt Collection Advisory Committee. The Committee is comprised of seven volunteer members serving two-year terms (can be reappointed), with one member representing consumers. Now California consumers have an identifiable entity to submit complaints and report debt collector violations without limiting their right to seek financial recovery via a lawsuit.
Does it matter who you pay? Better yet, do you have to pay?
Another of California’s enlightened legislation, is AB-424, the Private Student Loan Collections Reform Act (effective July 1, 2022). This purple unicorn creates documentation requirements for private education loan lenders before beginning debt collection activities. These private lenders must now provide consumer borrowers with a loan’s chain of ownership, starting with the original creditor thru subsequent debt holders.
For example, an audit of The National Collegiate Student Loan Trust (NCT) (which holds approximately 800,000 private student loans) revealed a sample size of at least 400 student loans that could not be traced to an owner/creditor. (Without an identified loan creditor/owner-is there a debt?) Lenders have often pursued California borrowers with false documents to collect alleged unpaid student loans.
AB-424 also requires settlements, final compromises, and payoffs to be documented in open court or, otherwise recorded in writing, shared with the debtor within 30 calendar days. Well, it sounds like missing or often resubmitted loan closeout documents could be a thing of the past for state residents.
But why should you care?
Because “hippy-dippy” California is often one of those states leading the country in progressive legislation. When one of America’s most populous states with an unmatched local economy envied by sovereign nations makes moves to reign in private education lender activity- other states are likely to consider doing the same. This impacts private student loan lenders-not student loans administered and held by the US Department of Education. (For an overview of the difference between private student loans and USDE loans read, “So You Thought Your Student Loans Would be Forgiven,” published here in March 2021)
As of June 2020, Californians held 10.3 Billion dollars in private student loan debt. The state has skin in the game. Residents bogged down in debt don’t buy homes, get preventive medical care, or fully invest for retirement. Thus, the state could be on the hook for future support of this sizeable group. I wonder if the Feds are looking at what can be done for private student loan borrowers? Do you think they are paying attention, and if they are, will they act for the consumer’s benefit rather than in the interests of corporate lobbyists, sorry, I meant loan holders?
Immediate Tasks: If you live outside of California, start agitating for private student loan borrower interests. Consumer interests can be protected at the state level – don’t wait for the Feds to act. The mid-term elections are here; loud and continuous voices get attention. Putting items in the news cycle is possible; social media made you publishers, influencers, authors, and activists.