California student loan servicers will now need to become licensed and post a surety bond. Assembly Bill 2251—called the Student Loan Servicing Act—will take effect in full on July 1, 2018. The Commissioner of the Department of Oversight can begin necessary actions to prepare for the changes on January 1, 2017.
Student loan servicers work with loan recipients to collect payments, help manage repayment, process requests for deferment or forbearance (temporary payment postponement), and help determine if recipients are eligible for loan forgiveness. They are not currently subject to any “consistent, marketwide federal standards,” which AB 2251 will correct within the state of California.
AB 2251 details the materials needed to apply for a license with the California Department of Business Oversight. Those materials include the following:
- Completed license application (to be provided by the Department)
- $100 application investigation fee + cost of fingerprint processing and criminal background check
- $300 application fee
- Audited financial statements showing a net worth of at least $250,000
Licensed student loan servicers must maintain a $25,000 surety bond. The bond protects consumers and the Department from losses if the servicer is not in compliance with the Student Loan Servicing Act. The Department can increase the required surety bond amount if needed, based on the dollar amount of loans the servicer handles.
Student loan servicers must file an annual report with the Department of Business Oversight, detailing business operations in the previous year. The report must be filed no later than March 15 annually. Violating any of the provisions of this Act could result in fines and license suspension or revocation.
As AB 2251’s effective date approaches, the Department will likely release student loan servicer application and surety bond forms. Contact them with questions about the approaching changes for student loan servicers. The experts at SuretyBonds.com can help you purchase a surety bond in California.