The Student Loan Borrower Bill of Rights in California was a new statute on consumer protection. Due to a perceived inability to manage student loan service, the California legislators found the legislation appropriate.
Although the Act is substantive, it does not scrub off debt or adjust loan terms. Instead, it protects borrowers from loan maintenance abuses that can make the debt more cost-efficient. It allows loan agents, in particular legally, to behave in the best interests of borrowers continuously.
It is a strong law that makes it illegal for service providers to profit from misunderstanding or a lack of understanding of a borrower’s repayment options. The law sets out industry-specific requirements for service by students, besides preventing abusive behavior. It also includes the right to punitive damages if the service provider fails to meet the new needs.
With all these new requirements, loan borrowers in California could be starting to make more progress in securing student debt. The Act is significant on 1 July 2021.
Provisions Provided by AB 376?
Current legislation regulations in a variety of categories are violated. The ‘Legal Notice of Rights provides that service staff and lenders should not treat student borrowers with coercive or predatory behavior.
Here are some of the basic requirements:
- Services providers need to have correct reimbursement details. Current details on these options must be given to borrowers who can access flexible payment options.
- Bondholders need to help default prevent borrowers. To reduce delay, borrowers should be provided with detailed information about repayment programs or other flexible compensation options.
- Servicers and lenders can omit no essential details. All relevant information about the loan must be provided, and it must not distort the debt.
- Service providers cannot use misunderstandings. It has to work for the best interests of borrowers, as it means that earnings are lacking.
- The legislation also allows for ‘road rules’ or standard procedures to be practiced by lenders in California to maintain their license. Many of the following rules include:
- Payments and other documentation shall be collected by the service providers promptly. Amounts issued on the day of charge before midnight should be indicated on time.
- Payments must be applied appropriately by servicers. Under AB 376, service providers shall submit compensation to the degree that fees, costs, and interest payments are held to a minimum.
- Service providers need to enhance record keeping. Many student loan service providers have a reputation for lousy record administration. This legislation allows service providers to keep their records informed so that borrowers can better monitor their payments.
- The law can have consequences, most importantly, for service providers and lenders who violate these rules. It provides an option mainly for private proceedings against student loan agents.
How Can California Borrowers Benefit?
Current borrowers will find some subtle benefits from the legislation as service employees tighten up their practices. For instance, overpayments should be enforced in the borrower’s best interest, not after a reduction in principal but after six months of ‘prepaid’ payments. And when you call, service staff will start getting faster responses and better answers.
However, borrowers dealing with loan repayments would be the real winners of the rule. These borrowers should have better replies about how defaults can be avoided. And if applicable, they should obtain valuable details on repayment plans and choices of lending forgiveness.
Finally, debtors deceived by their decisions would be entitled to sue for damages from their servicers. This act would not be an excuse to mispaid or abuse loan payments by creditors. Instead, it would assign service providers duty to work with borrowers’ best interests.
The Bill of Rights will not come into force until 1 July 2021 for the student of California. However, the California Department of Financial Security and Innovation may begin filing complaints against loan service providers.
When you want to have a second choice to check that you obtain the correct refund guidance from your service provider, consider hiring a student loan CFA or CFP. We suggest that you build a robust plan for your student loan debt with the Student Loan Planner.