In the closing hours of its legislative session, the Massachusetts legislature this week passed a bill that, among other things, will require servicers of student loans to now obtain a license while also establishing a student loan ombudsman office that will be charged with identifying trends, including unfair and deceptive acts or practices.
A copy of the bill, H.5250, can be accessed by clicking here.
If signed by Massachusetts Gov. Charlie Baker, the bill will create a Student Loan Borrower Bill of Rights, helping individuals in the state where student loan debt has grown the fastest during the past two decades, according to a state representative.
Under the bill, student loan servicers are defined as “a person responsible for servicing a student loan to a student loan borrower.” Banks, credit unions, and their wholly-owned subsidiaries are exempt from needing a license. Licenses will be given to servicers whose financial condition is sound, whose business will be conducted “honestly, fairly, equitably, carefully, and efficiently,” and who is properly qualified and of good character. The bill does say that student loan servicers licenses under chapter 93L who are “engaged solely in the activities of a student loan servicer” shall not be required to obtain a debt collection license or register as a third-party loan servicer. If the servicer operates outside of the scope of chapter 93L, then the other licenses are required, as appropriate.
“The passage of the bill will codify desperately needed protections for borrowers,” said Sen. Eric P. Lesser, Chair of the Joint Committee on Economic Development and Emerging Technologies and lead negotiator for the economic development conference committee, in a statement. “We have fought tirelessly … since 2017 to put these guidelines in place, and thanks to everyone’s hard work we can now begin to rebalance the scales in an unfair system that has burdened an entire generation with debt.”