Sec. 2. Requirements for private educational lenders
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Section 140 of the Truth in Lending Act ( 15 U.S.C. 1650 ) is amended by adding at the end the following new subsection: If a private education loan has a cosigner who is jointly liable for such loan, a private educational lender shall include a process for releasing the cosigner from any obligations on the loan and in such process the lender— shall make the criteria for obtaining the release clear, transparent, and easily accessible via the website of the private educational lender; shall notify the borrower if the borrower is eligible to release a cosigner; shall, if denying a request to release a cosigner, provide an explanation for the denial and offer the borrower an opportunity to correct the request; and may not change the terms of the release to impose additional duties on, or be detrimental to the interests of, the borrower or cosigner over the duration of the private education loan.
Notwithstanding any provision in a private education loan agreement that contains a process for releasing a cosigner from obligations on the loan, a private educational lender shall, upon receiving notification of the death or bankruptcy of a cosigner— notify the borrower about the borrower’s rights under the private education loan agreement regarding the release of the cosigner; and if the borrower continues to make on-time payments (in the amount determined prior to the death or bankruptcy of the cosigner) on the private education loan, provide a period of time of not less than 90 days for the borrower to follow the process for release of the cosigner before deeming that the borrower has failed to repay the loan, changing the terms of the loan, accelerating the repayment terms of the loan, referring the loan to a debt collector (as defined in section 803 of the Fair Debt Collection Practices Act ( 15 U.S.C. 1692a )), or notifying consumer reporting agencies (as defined in section 603(f)) of a change in the status of the loan.
A private educational lender may not evaluate the credit worthiness, credit standing, or credit capacity of a borrower or a cosigner at the time at which a cosigner is released from obligations on a private education loan using a different standard than was used to evaluate the credit worthiness, credit standing, or credit capacity of the borrower or cosigner at the time of the origination of the loan. Notwithstanding any provision in a private education loan agreement, a private educational lender shall, upon receiving notification of the death or bankruptcy of a cosigner who is jointly liable for the private education loan— notify the borrower about the borrower’s rights under the private education loan agreement regarding identifying a new cosigner or refinancing the loan; and if the borrower continues to make on-time payments (in the amount determined prior to the death or bankruptcy of the cosigner) on the private education loan, provide a period of time of not less than 90 days for a borrower to identify a new cosigner or refinance the loan before deeming that the borrower has failed to repay the loan, changing the terms of the loan, accelerating the repayment terms of the loan, referring the loan to a debt collector (as defined in section 803 of the Fair Debt Collection Practices Act ( 15 U.S.C. 1692a )), or notifying consumer reporting agencies (as defined in section 603(f)) of a change in the status of the loan.
A private educational lender may not evaluate the credit worthiness, credit standing, or credit capacity of a new cosigner using a stricter standard than used to evaluate the credit worthiness, credit standing, or credit capacity of the original cosigner. .
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