N.Y. Comp. Codes R. & Regs. tit. 3 § 409.8

Current through Register Vol. 46, No. 25, June 18, 2024

Section 409.8 - Servicing standards

(a) A student loan servicer shall not misrepresent or omit any material information in connection with the servicing of a student loan, including, but not limited to, misrepresenting or omitting:

(1) the amount, nature, or terms of any fee or payment due or claimed to be due on a student loan;

(2) the terms and conditions of a student loan or a borrower's obligations under a student loan; or

(3) the availability of any program or protection specific to or applicable to military borrowers, borrowers working in public service, older borrowers, cosigners, or borrowers with disabilities.

(b) Nonconforming payments. Except as provided in federal law or required by a student loan agreement:

(1) a student loan servicer shall inquire of a borrower how to apply a borrower's nonconforming payment, shall give a borrower not less than ten business days to provide instructions, and shall follow the borrower's instructions on how to apply a nonconforming payment. A borrower's instructions on how to apply a nonconforming payment shall remain in effect for any future nonconforming payment during the term of a student loan until the borrower provides different instructions.

(2) if a borrower has multiple loans with a student loan servicer and does not provide instructions to the student loan servicer on how to apply a nonconforming payment, a student loan servicer shall:

(i) apply an overpayment in a manner that is in the best financial interest of the borrower. A student loan servicer shall be considered to meet the requirements of this subparagraph if the servicer applies the overpayment to the highest interest-rate loan on the borrower's account.

(ii) apply a partial payment in a manner that minimizes late fees and negative credit reporting. If there are multiple loans on a borrower's account with an equal stage of delinquency, a student loan servicer shall satisfy the requirements of this subparagraph by applying a partial payment to satisfy as many loans as possible on a borrower's account.

(c) Consumer reporting.

(1) A student loan servicer shall not provide inaccurate information to a consumer reporting agency.

(2) If a student loan servicer regularly reports information to a consumer reporting agency, the student loan servicer shall accurately report a borrower's payment performance to at least one consumer reporting agency that compiles and maintains files on consumers on a nationwide basis as defined in Section 603 of the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681a(p)), upon acceptance as a data furnisher by that consumer reporting agency.

(d) Sale, assignment, or other transfer of servicing.

(1) If the sale, assignment, or other transfer of the servicing of a student loan results in a change in the identity of the person to whom a borrower is required to send subsequent payments or direct any communications concerning a student loan, a student loan servicer shall transfer all information regarding the borrower, the borrower's account, and the borrower's student loan to the new student loan servicer servicing the borrower's student loan within forty-five days. Such information shall include, at a minimum:

(i) the borrower's repayment status;

(ii) any borrower benefits associated with the borrower's student loan;

(iii) a schedule of all transactions credited or debited to the student loan account;

(iv) a copy of the promissory note for the student loan;

(v) any notes created by student loan servicer personnel reflecting communications with the borrower about the student loan account;

(vi) a report of the data fields relating to the borrower's student loan account created by the student loan servicer's electronic systems in connection with servicing practices;

(vii) copies of any information or documents provided by the borrower to the student loan servicer;

(viii) usable data fields with information necessary to assess qualification for forgiveness, including public service loan forgiveness; and

(ix) any information necessary to compile a payment history.

(2) A student loan servicer shall adopt policies and procedures to verify that it has received all information regarding a borrower, a borrower's account, and a borrower's student loan, including at a minimum the information listed in paragraph (1) of this subdivision, when the student loan servicer obtains the right to service a student loan.

(3) If a student loan servicer sells, assigns, or otherwise transfers the servicing of a student loan to a new student loan servicer, the sale, assignment or other transfer shall be completed at least seven days before the borrower's next payment is due.

(4) A student loan servicer that sells, assigns, or otherwise transfers the servicing of a student loan shall require as a condition of such sale, assignment, or other transfer that the new student loan servicer shall honor all borrower benefits originally represented as being available to a borrower during the repayment of the student loan and the possibility of such benefits, including any benefits that were represented as being available but for which the borrower had not yet qualified.

(5) A student loan servicer that obtains the right to service a student loan shall honor all borrower benefits originally represented as being available to a borrower during the repayment of the student loan and the possibility of such benefits, including any benefits that were represented as being available but for which the borrower had not yet qualified.

(e) A student loan servicer shall post, process, and credit student loan payments in a timely manner, including but not limited to:

(1) crediting a payment received on the date on which that payment is due as effective on the date on which the student loan servicer received the payment; and

(2) treating a payment received from a borrower on or before the borrower's due date as an on-time payment.

(f) Customer service.

(1) A student loan servicer shall prominently post, on the homepage of the student loan servicer's website, a toll-free telephone number a borrower may call to discuss their student loans with a live person.

(2) A student loan servicer shall fully train representatives who answer calls to the toll-free number described in paragraph (1) of this subdivision and shall ensure that such representatives are capable of informing and discussing with callers any available alternative repayment plans, loan forgiveness, cancellation, and discharge benefits. If a caller calls to inquire about repayment options, such student loan servicer representatives shall inform and discuss with callers any available alternative repayment plans, loan forgiveness, cancellation, and discharge benefits. Such student loan servicer representatives must also be trained in the differences among deferment, forbearance, and alternative repayment plans, and be able to answer caller questions regarding the differences.

(g) Loan repayment options and loan forgiveness benefits.

(1) To assist the prevention of borrower delinquency or default, a student loan servicer shall prominently post, on the student loan servicer's website, clear and complete information, written in easily understandable language, about any available repayment options, including deferments and income-based alternative repayment plans, and forgiveness or discharge benefits. The posted information may appear on the student loan servicer's homepage or be available through links on the homepage to specified web pages. Student loan servicers that service Direct Loans or FFELP Loans shall include direct, live links to the following web pages, or successor or replacement web pages, of the Student Aid Office of the United States Department of Education website: "How to Repay Your Loans," https://studentaid.ed.gov/sa/repay-loans; and https://studentloans.gov/myDirectLoan/repayOptions.action.

(2) At least once per calendar year, a student loan servicer shall send to borrowers a plain language notice, containing the information or links to information regarding repayment, loan forgiveness, and discharge options, required under this rule. This notice shall also include the toll-free telephone number described in paragraph (1) of subdivision (f) of this section to call to discuss student loans with a live person.

(3) A student loan servicer shall establish policies and procedures, and implement them consistently, in order to facilitate disclosure of any available alternative repayment arrangements, including:

(i) providing accurate information regarding any alternative repayment arrangements that may be available to the borrower through the promissory note, that may have been marketed to the borrower though marketing materials, or that have been widely advertised or marketed by the servicer, original lender, or promissory note holder as available to similarly-situated borrowers; and

(ii) consistently presenting and offering any available alternative repayment arrangements to borrowers with similar financial circumstances.

(h) Borrower information and statements of account.

(1) A student loan servicer shall maintain and make available through its website, free of charge, clear and complete information and account records for each borrower. This information and accounting shall be accessible to the borrower only, through a secure log-in system. This information shall include a consolidated report for each borrower, and a loan history for each student loan serviced. This information and accounting shall be available to borrowers at all times, except for occasional, short periods of time when the student loan servicer's system is not available because the system is undergoing routine maintenance or blocked for security reasons.

(2) The consolidated report required under paragraph (1) of this subdivision must include, at a minimum:

(i) borrower name;

(ii) number of student loan(s) serviced for each borrower;

(iii) loan number, for each student loan;

(iv) loan type, i.e., Direct Loan; FFELP Loan; Perkins Loan; or private student loan.

(v) loan disbursement amount and date, for each student loan;

(vi) interest rate(s) and maturity date, or number of monthly payments required to repay the loan, for each student loan;

(vii) loan balance and status, for each student loan;

(viii) cumulative balance owing for each borrower;

(ix) whether the borrower has an application pending for, or is repaying under, an alternative repayment plan, listing the plan chosen; and

(x) whether the borrower has an application pending for any loan forgiveness cancellation, or discharge benefit.

(3) The loan history required under paragraph (1) of this subdivision must include, at a minimum, the following information, including the corresponding dates for each:

(i) disbursements;

(ii) interest accruals;

(iii) fees;

(iv) late charges;

(v) any other miscellaneous amounts charged to the borrower;

(vi) payments received;

(vii) payments toward loan forgiveness programs; and

(viii) the borrower's repayment plan.

(i) A student loan servicer that services private student loans must provide on its website clear and complete information, written in easily understandable language, concerning the availability and criteria for a cosigner release.

(j) Consumer complaints and inquiries.

(1) A student loan servicer shall respond within fifteen calendar days to a consumer complaint submitted to the student loan servicer by the department. A student loan servicer may request additional time to respond up to a maximum of forty-five calendar days. Such a request for additional time must be accompanied by an explanation why such additional time is reasonable and necessary. The department may grant additional time to respond in its sole discretion.

(2) A student loan servicer shall not refuse to communicate with an authorized representative of a borrower who provides a written authorization signed by such borrower, including those transmitted to the student loan servicer by mail, facsimile, or electronically, provided that the student loan servicer may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the borrower.

(3) Complaints from a Borrower or a Borrower's Representative. A student loan servicer shall comply with the requirements of this section for any written complaint, including those transmitted by mail, facsimile, or electronically, from a borrower or an authorized representative of a borrower that enables the student loan servicer to identify the name and account of the borrower, the borrower's student loan account, and the nature of the borrower's complaint.

(i) Within ten days of receiving a complaint, a student loan servicer shall acknowledge receipt of the complaint and inform the borrower or the authorized representative of the borrower of any additional information or documentation required by the student loan servicer to review and address the complaint.

(ii) A student loan servicer must conduct a reasonable investigation of the complaint and either:

(a) correct any error or other servicing-related issue identified and provide the borrower or the authorized representative of the borrower with a written notification of the correction and the effective date of the correction; or

(b) if the student loan servicer has determined that no error occurred or that no action is warranted to correct a servicing-related issue, inform the borrower or the authorized representative of the borrower, in writing delivered via mail unless the borrower has elected to receive this response in another format, of the results of the student loan servicer's investigation and provide a statement of the reason or reasons for this determination.

(iii) A student loan servicer shall comply with the requirements of subparagraph (ii) of this paragraph within thirty days of receiving a complaint.

(4) A student loan servicer shall adopt policies and procedures permitting borrowers to escalate a complaint or inquiry to a senior representative if the borrower is dissatisfied with the outcome of the initial complaint or inquiry.

(k) All information listed in paragraph (1) of subdivision (d) of this section, and all communications with borrowers shall be considered books and records of the student loan servicer and shall be preserved pursuant to the requirements of section 409.13 of this part.

(l) A student loan servicer shall adopt policies and procedures permitting borrowers to obtain hard copies of information required to be disclosed by the student loan servicer, with particular focus on meeting the needs of borrowers without access to the internet.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 409.8

Adopted New York State Register October 16, 2019/Volume XLI, Issue 42, eff. 10/16/2019