§ 5-20-108 — Affirmative acts required of student loan servicers - definitions

(1) Except as otherwise provided in federal law, federal student education loan
agreements, or a contract between the federal government and a student loan
servicer, a student loan servicer shall take the actions specified in this section.

(2) (a) A student loan servicer shall respond to a written inquiry from a
student loan borrower, the representative of a student loan borrower, or the
student loan ombudsperson within ten business days after receipt of the request
and, within thirty business days after receipt of the request, provide information
relating to the request and, if applicable, the action the student loan servicer will
take to correct the account or an explanation for the student loan servicer's
position that the borrower's account is correct.

(b) The thirty-day period described in subsection (2)(a) of this section may be
extended for not more than fifteen days if, before the end of the thirty-day period,
the student loan servicer notifies the borrower, the borrower's representative, or
the ombudsperson, as applicable, of the extension and the reasons for the delay in
responding.

(c) After receipt of a written request related to a dispute on a borrower's
payment on a student education loan, a student loan servicer shall not, for the sixty
days following receipt, furnish adverse information to a consumer reporting agency
regarding a payment that is the subject of the written inquiry.

(3) (a) Except as provided in federal law or required by a student loan
agreement, a student loan servicer shall inquire of a borrower how to apply an
overpayment to a student education loan. A borrower's direction on how to apply an
overpayment to a student education loan stays in effect for any future
overpayments during the term of a student education loan until the borrower
provides different directions.

(b) For purposes of this subsection (3), overpayment means a payment on a
student education loan in excess of the monthly amount due from a borrower on a
student education loan, also commonly referred to as a prepayment.

(4) (a) A student loan servicer shall apply partial payments in a manner that
minimizes late fees and negative credit reporting. Where loans on a borrower's
student loan account have an equal level of delinquency, a student loan servicer
shall apply partial payments to satisfy as many individual loan payments as
possible on a borrower's account.

(b) For purposes of this subsection (4), partial payment means a payment
on a student loan account that contains multiple individual loans in an amount less
than the amount necessary to satisfy the outstanding payment due on all loans in
the student loan account, also commonly referred to as an underpayment.

(5) In the event of the sale, assignment, or other transfer of the servicing of a
student education loan that results in a change in the identity of the person to
whom a student loan borrower is required to send payments or direct any
communication concerning the student education loan, the following provisions
apply:

(a) As a condition of a sale, an assignment, or any other transfer of the
servicing of a student education loan, a student loan servicer shall require the new
student loan servicer to honor all benefits originally represented as available to a
student loan borrower during the repayment of the student education loan and
preserve the availability of the benefits, including any benefits for which the
student loan borrower has not yet qualified. If a student loan servicer is not also the
loan holder or is not acting on behalf of the loan holder, the student loan servicer
satisfies the requirement established by this subsection (5)(a) by providing the new
student loan servicer with information necessary for the new student loan servicer
to honor all benefits originally represented as available to a student loan borrower
during the repayment of the student education loan and preserve the availability of
the benefits, including any benefits for which the student loan borrower has not yet
qualified.

(b) A student loan servicer shall transfer to the new student loan servicer all
records regarding the student loan borrower, the account of the student loan
borrower, and the student education loan of the student loan borrower.

(c) The records required under subsection (5)(b) of this section include the
repayment status of the student loan borrower and any benefits associated with
the student education loan of the student loan borrower.

(d) The student loan servicer shall complete the transfer of records required
under subsection (5)(b) of this section within forty-five days after the sale,
assignment, or other transfer of the servicing of a student education loan.

(e) The parties shall notify affected student loan borrowers of the sale,
assignment, or other transfer of the servicing of a student education loan at least
seven days before the next payment on the loan is due. The notice must include:

(I) The identity of the new student loan servicer;

(II) The effective date of the transfer of the student loan borrower's student
education loan to the new student loan servicer;

(III) The date on which the existing student loan servicer will no longer
accept payments; and

(IV) The contact information for the new student loan servicer.

(6) A student loan servicer that services a student education loan shall adopt
policies and procedures to verify that the student loan servicer has received all
records regarding the student loan borrower, the account of the student loan
borrower, and the student education loan of the student loan borrower, including
the repayment status of the student loan borrower and any benefits associated
with the student education loan of the student loan borrower.

Legislative History

Source: L. 2019: Entire article added, (SB 19-002), ch. 157, p. 1865, � 2, effective August 2.