AB711: Bill Text

LRB-2971/1

ARG:cdc

2021 - 2022 LEGISLATURE

2021 Assembly BILL 711

November 12, 2021 - Introduced by Representatives Hesselbein, Drake, Emerson, S. Rodriguez, Shelton, Conley, Andraca, Vruwink, Spreitzer, Neubauer, Hebl, Ohnstad, Milroy, Cabrera, Bowen, Considine, Stubbs, Shankland, Subeck, Hong, Baldeh, L. Myers and Pope, cosponsored by Senators Smith, Erpenbach, Roys, Wirch, Agard, Ringhand, Larson, Johnson and Carpenter. Referred to Committee on Financial Institutions.

AB711,1,5 An Act to amend 15.01 (6) and 15.02 (3) (c) 1.; and to create 15.185 (6) and subchapter V of chapter 224 [precedes 224.101] of the statutes; relating to: student loans for postsecondary education, requirements related to student loan servicers, creating an office of the student loan ombudsman in the Department of Financial Institutions, and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill creates an Office of the Student Loan Ombudsman (office) in the Department of Financial Institutions and requires student loan servicers to be licensed by this office. The bill contains a variety of provisions governing student education loans, student loan borrowers, and student loan servicers. Under the bill, a “student education loan" means a loan that is extended to a student loan borrower expressly for postsecondary education expenses or related expenses. A “student loan borrower" means a resident of this state who has received or agreed to pay a student education loan or a person who shares legal responsibility for repaying the loan. A “student loan servicer" means a person responsible for the servicing of a student education loan, but excludes certain state-regulated financial service providers. “Servicing” means receiving scheduled periodic payments from a student loan borrower; applying payments received from a student loan borrower; and performing other administrative services with respect to a student education loan.

The bill requires a student loan servicer, wherever located, to be licensed by the office before directly or indirectly engaging in servicing student education loans in this state. A student loan servicer must hold a separate license for each of its places of business and the student loan servicer may not act under any name or at any place of business that is not identified in the license.

The bill imposes numerous requirements on student loan servicers, including requirements relating to all of the following:

1. Responding to written inquiries from student loan borrowers.

2. Handling and applying “nonconforming payments," defined as payments on student education loans that are different from the required payments.

3. Responsibilities if there is a sale, assignment, or other transfer of the servicing of a student education loan.

4. Maintaining and making available to the office records related to student education loan transactions.

The bill also prohibits a student loan servicer from engaging in certain conduct or activity, including the following:

1. Defrauding or misleading a student loan borrower.

2. Engaging in an unfair or deceptive practice or misrepresenting or omitting material information in connection with the servicing of a student education loan.

3. Misapplying student education loan payments.

4. Providing inaccurate information to a credit bureau related to a student loan borrower's creditworthiness.

5. Refusing to communicate with an authorized representative of a student loan borrower.

6. Failing to evaluate a student loan borrower for an income-based repayment program prior to placing the student loan borrower in default.

The bill also specifies the authority of the office to conduct investigations and examinations and take administrative action and also provides a private right of action for violations of the requirements or prohibitions under the bill.

The bill requires the office to perform certain functions, including: 1) assisting student loan borrowers; 2) receiving and attempting to resolve complaints from student loan borrowers and others; 3) compiling and analyzing data about these complaints; 4) assisting student loan borrowers in various ways; 5) providing information to the public and others regarding the problems and concerns of student loan borrowers; and 6) analyzing and monitoring the development and implementation of laws and policies relating to student loan borrowers.

Although the bill exempts certain state-regulated financial service providers, primarily state-chartered financial institutions, from licensing and most other requirements applicable to student loan servicers, the bill requires these exempt organizations to cooperate with the office and provide information requested by the office necessary to investigate and resolve student loan borrower complaints.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB711,1 Section 1. 15.01 (6) of the statutes is amended to read:

AB711,3,13 15.01 (6) “Division," “bureau," “section," and “unit" means the subunits of a department or an independent agency, whether specifically created by law or created by the head of the department or the independent agency for the more economic and efficient administration and operation of the programs assigned to the department or independent agency. The office of credit unions and the office of the student loan ombudsman in the department of financial institutions, the office of the inspector general in the department of children and families, the office of the inspector general in the department of health services, and the office of children's mental health in the department of health services have the meaning of “division" under this subsection. The office of the long-term care ombudsman under the board on aging and long-term care and the office of educational accountability in the department of public instruction have the meaning of “bureau" under this subsection.

AB711,2 Section 2. 15.02 (3) (c) 1. of the statutes is amended to read:

AB711,3,22 15.02 (3) (c) 1. The principal subunit of the department is the “division". Each division shall be headed by an “administrator". The office of credit unions and the office of the student loan ombudsman in the department of financial institutions and the office of children's mental health in the department of health services have the meaning of “division" and the director of credit unions in the department of financial institutions and the director of the office of children's mental health in the department of health services have the meaning of “administrator" under this subdivision.

AB711,3 Section 3. 15.185 (6) of the statutes is created to read:

AB711,3,25 15.185 (6) Office of the student loan ombudsman. There is created in the department of financial institutions an office of the student loan ombudsman.

AB711,4 Section 4. Subchapter V of chapter 224 [precedes 224.101] of the statutes is created to read:

AB711,4,3 Chapter 224

AB711,4,5 Subchapter V STUDENT LOANS

AB711,4,6 224.101 Definitions. In this subchapter:

AB711,4,7 (1) “Board” means the higher educational aids board.

AB711,4,9 (2) “Exempt organization” means the board or a state-regulated financial service provider.

AB711,4,10 (3) “Licensee” means a person holding a license issued under this subchapter.

AB711,4,11 (4) “Office” means the office of the student loan ombudsman in the department.

AB711,4,12 (5) “Servicing" means doing all of the following:

AB711,4,14 (a) Receiving scheduled periodic payments from a student loan borrower pursuant to the terms of a student education loan.

AB711,4,17 (b) Applying the payments of principal and interest and any other payments with respect to the amounts received from a student loan borrower as may be required pursuant to the terms of a student education loan.

AB711,4,19 (c) Performing other administrative services with respect to a student education loan.

AB711,4,20 (6) “State-regulated financial service provider” means any of the following:

AB711,4,21 (a) A bank organized under ch. 221.

AB711,4,22 (b) A savings bank organized under ch. 214.

AB711,4,23 (c) A savings and loan association organized under ch. 215.

AB711,4,24 (d) A credit union organized under ch. 186.

AB711,4,25 (e) A consumer lender licensed under s. 138.09.

AB711,5,3 (7) “Student education loan" means a loan that is extended to a student loan borrower expressly for postsecondary education expenses or related expenses and does not include open-end credit or any loan that is secured by real property.

AB711,5,4 (8) “Student loan borrower" means any of the following:

AB711,5,6 (a) A resident of this state who has received or agreed to pay a student education loan.

AB711,5,8 (b) A person who shares legal responsibility with a resident under par. (a) for repaying the student education loan.

AB711,5,11 (9) “Student loan servicer" means a person, wherever located, responsible for the servicing of a student education loan, but does not include the board or any state-regulated financial service provider.

AB711,5,12 224.102 Ombudsman services. The office shall do all of the following:

AB711,5,13 (1) Provide timely assistance to student loan borrowers.

AB711,5,14 (2) Receive, review, and attempt to resolve complaints from all of the following:

AB711,5,15 (a) Student loan borrowers.

AB711,5,18 (b) In collaboration with institutions of higher education, student loan servicers and any other participants in student education loan lending, including originators servicing their own student education loans.

AB711,5,20 (3) Compile and analyze data on student loan borrower complaints as described in sub. (2) and as resolved under s. 224.104.

AB711,5,22 (4) Assist student loan borrowers in understanding their rights and responsibilities under the terms of student education loans.

AB711,5,25 (5) Provide information to the public, agencies, the legislature, and others regarding the problems and concerns of student loan borrowers and make recommendations for resolving those problems and concerns.