Sec. 2. Improved consumer protections for student loan servicing

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Chapter 2 of title I of the Truth in Lending Act ( 15 U.S.C. 1601 et seq. ) is amended by adding at the end the following new section: A postsecondary education lender shall disclose to each person who applies for a postsecondary education loan, at the time of application for such loan, whether there may be a transfer of servicing of such loan at any time during which a balance is due on such loan. A postsecondary education lender shall not be liable to a borrower for failure to comply with paragraph

(1)if the application for a postsecondary education loan was made before the rules or regulations established under subsection

(f)take effect. A transferor servicer shall notify the borrower under a postsecondary education loan of any transfer of student loan servicing for the postsecondary education loan. Such notice shall be made to the borrower— not later than 15 days before the effective date of transfer of the student loan servicing; or not more than 30 days after the effective date of transfer of the student loan servicing, if the transfer of such servicing is preceded by— termination of the contract for such servicing for cause; commencement of bankruptcy proceedings of the transferor servicer; or any other situation in which the Bureau determines that such exception is warranted. The notice required under paragraph

(1)shall be made in writing and, if the transferor servicer has an email address for the borrower, sent by email, and shall include— the effective date of the transfer; the name, address, website, and toll-free or collect-call telephone number of the transferee servicer; a toll-free or collect-call telephone number for an individual employed by the transferor servicer, or the office or department of, the transferor servicer that the borrower may contact for inquiries relating to the transfer of servicing; the name and toll-free or collect-call telephone number for an individual employed by the transferee servicer, or the office or department of, the transferee servicer that the borrower may contact for inquiries relating to the transfer of servicing; the date on which the transferor servicer will stop accepting payments relating to the postsecondary education loan to be transferred and the date on which the transferee servicer will begin to accept such payments; a statement that the transfer of student loan servicing of the postsecondary education loan does not affect any term or condition of the postsecondary education loan other than terms directly related to such student loan servicing; a statement disclosing— whether borrower authorization for recurring electronic funds transfers will be transferred to the transferee servicer; and if any such recurring electronic funds transfers cannot be transferred, information as to how the borrower may establish new recurring electronic funds transfers in connection with transfer of servicing to the transferee servicer; a statement disclosing— the application of all payments and charges relating to the postsecondary education loan to be transferred as of the effective date of the transfer, including— the date the last payment of the borrower was received; the date the last late fee, arrearage, or other charge was applied; and the amount of the last payment allocated to principal, interest, and other charges; the status of such loan as of the effective date of the transfer, including whether the borrower is in default on the loan; whether any application for an alternative repayment arrangement submitted by the borrower is pending; and an itemization and explanation for all arrearages claimed to be due as of the effective date of the transfer; a detailed description of any benefit, alternative repayment arrangement, or other term or condition arranged between the transferor servicer and the borrower that is not included in the terms of the loan agreement; a detailed description of any item under subparagraph

(H)that will not apply upon transfer, including an explanation of why such item will not apply; and information on how to file a complaint against the transferor servicer with the Bureau. A transferee servicer shall notify the borrower under a postsecondary education loan, in writing, of any transfer of student loan servicing of a postsecondary education loan. Such notice shall be made to the borrower— not later than 15 days before the effective date of transfer of the student loan servicing; or not more than 30 days after the effective date of transfer of the student loan servicing, if the transfer of such servicing is preceded by— termination of the contract for such servicing for cause; commencement of bankruptcy proceedings of the transferor servicer; or any other situation in which the Bureau determines that such exception is warranted. The notice required under subparagraph

(A)shall be made in the same manner and include the same information, as applicable, as described in paragraph (2). During the 60-day period beginning on the effective date of transfer relating to a postsecondary education loan to be transferred, a late fee may not be imposed on the borrower with respect to any payment on such loan, and no such payment may be treated as late for any other purposes if— the payment is received by the transferor servicer instead of the transferee servicer (who should properly receive payment) before the due date applicable to such payment; or the payment is received by the transferee servicer instead of the transferor servicer (who should properly receive payment) before the transfer is complete. To the maximum extent practicable, a transferor servicer shall notify a borrower, both in writing and by telephone, regarding any payment described in paragraph (1). A transferee servicer shall make available to a borrower whose student loan servicing is transferred to the transferee servicer a simple, online process through which the borrower may transfer to the transferee servicer any existing authority for an electronic fund transfer that the borrower had provided to the transferor servicer. A student loan servicer shall not be liable to a borrower for failure to comply with the requirements of subsection

(b)with respect to a transfer of student loan servicing before the regulations under subsection

(f)take effect. A student loan servicer or a postsecondary education lender shall not be liable to a borrower for failure to comply with a requirement under this section if, not later than 60 days after discovering an error and before the commencement of an action under section 130 or the receipt of written notice of the error from the borrower, the student loan servicer notifies the borrower of the error and makes any adjustments in the appropriate account that are necessary to ensure that the borrower will not be required to pay an amount greater than the amount that the borrower otherwise would have paid. The Bureau, in consultation with the Secretary of Education, is authorized to prescribe such rules and regulations, make such interpretations, and grant such reasonable exemptions, in accordance with, and as may be necessary to achieve the purposes of, this chapter. In this section, the following definitions shall apply: The term alternative repayment arrangement means an agreed upon arrangement between a loan holder (or, for a Federal Direct Loan or a Federal Perkins Loan, the Secretary of Education or the institution of higher education that made such loan, respectively) or student loan servicer and a borrower— that is different than the terms of an existing postsecondary education loan arrangement or agreement; and pursuant to which remittance of a monthly payment— satisfies the terms of the postsecondary education loan; or is not required for a period of 1 or more months in order to satisfy the terms of the postsecondary education loan arrangement or agreement. The term effective date of transfer means the date on which the first payment is due to a transferee servicer from a borrower under a postsecondary education loan. The term Federal Direct Loan means a loan made under part D of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087a et seq. ). The term Federal Perkins Loan means a loan made under part E of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087aa et seq. ). The term institution of higher education has the meaning given that term in section 102 of the Higher Education Act of 1965 ( 20 U.S.C. 1002 ). The term late fee means a late fee, penalty, or adjustment to principal, imposed because of a late payment or delinquency by the borrower under a postsecondary education loan. The term loan holder means a person who owns the title to or promissory note for a postsecondary education loan (except for a Federal Direct Loan or a Federal Perkins Loan). The term postsecondary education expense means any expense that is included as part of the cost of attendance (as that term is defined in section 472 of the Higher Education Act of 1965 ( 20 U.S.C. 1087ll )) of a student. The term postsecondary education lender — means— a financial institution, as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 ) that solicits, makes, or extends postsecondary education loans; a Federal credit union, as defined in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 ) that solicits, makes, or extends postsecondary education loans; and any other person engaged in the business of soliciting, making, or extending postsecondary education loans; and does not include— the Secretary of Education; or an institution of higher education with respect to any Federal Perkins Loan made by the institution. The term postsecondary education loan means a loan that is— made, insured, or guaranteed under part B, D, or E of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1071 et seq. , 1087a et seq., 1087aa et seq.); issued or made by a postsecondary education lender and is— extended to a borrower with the expectation that the amounts extended will be used in whole or in part to pay postsecondary education expenses; or extended for the purpose of refinancing or consolidating 1 or more loans described in subparagraph (A); or a private education loan (as defined in section 140(a)). The term student loan servicer — means a person who performs student loan servicing; includes a person performing student loan servicing for a postsecondary education loan on behalf of an institution of higher education or the Secretary of Education under a contract or other agreement; does not include the Secretary of Education to the extent the Secretary directly performs student loan servicing for a postsecondary education loan; and does not include an institution of higher education, to the extent that the institution directly performs student loan servicing for a Federal Perkins Loan made by the institution. The term student loan servicing means, with respect to a postsecondary education loan, any of the following activities: Receiving any scheduled periodic payments, or notification of such payments, from a borrower under a postsecondary education loan. Applying payments described in subparagraph

(A)to an account of the borrower pursuant to the terms of the postsecondary education loan or of the contract governing the servicing of the postsecondary education loan. During a period in which no payment is required on the postsecondary education loan— maintaining account records for the loan; and communicating with the borrower on behalf of the loan holder or, with respect to a Federal Direct Loan or Federal Perkins Loan, the Secretary of Education or the institution of higher education that made the loan, respectively. Interacting with a borrower to facilitate the activities described in subparagraphs (A), (B), and (C), including activities to help prevent default by the borrower of the obligations arising from the postsecondary education loan. The term transfer of servicing means the assignment, sale, or transfer of any student loan servicing of a postsecondary education loan from a transferor servicer to a transferee servicer. The term transferee servicer means the student loan servicer to whom any student loan servicing of a postsecondary education loan is assigned, sold, or transferred. The term transferor servicer means the student loan servicer who assigns, sells, or transfers any student loan servicing of a postsecondary education loan to another person. . The table of contents for chapter 2 of title I of the Truth in Lending Act is amended by inserting after the item relating to section 140A the following new item: 140B. Transfer of servicing of postsecondary education loans. .

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Sec. 2

Improved consumer protections for student loan servicing

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