Proposed Colo. Student Loan Collection Overhaul Being Considered

A bill is circulating around the Colorado legislature that would dramatically overhaul how student loans are collected in the state, removing an exemption for licensed collection agencies while also imposing new disclosure requirements and imposing extensive civil liability exposure for those found to violate the provisions of the bill, should it become law.

The bill would expand the Colorado Student Loan Servicers Act, which became law two years ago. The bill has not yet been introduced in the Colorado legislature, but a draft of the bill has begun circulating around the statehouse and the industry. The bill appears to be sponsored by Sen. Faith Winter, who earlier this year introduced a bill that was signed into law and extended the moratorium on extraordinary collection activities in Colorado through June 30.

The new student loan bill would remove an exemption for licensed collection agencies to have to comply with the provisions of the Student Loan Servicers Act while also adding new requirements and imposing stiffer penalties. Servicers, for example, would be required to provide the following information in an initial debt collection communication and at any time the borrower requests:

  • The name of the owner of the debt
  • The name of the true original lender and every subsequent loan holder, if applicable
  • The true original lender’s account number
  • The amount due at the time of default
  • A schedule of all transactions credited or debited to the account
  • A copy of all pages of the contract, application or other documents proving the borrower’s liability for repaying the loan
  • A clear and conspicuous statement that the borrower has a right to request all the information possessed by the lender related to the defaulted debt and that failing to provide that information within 30 days of receiving such a request precludes the agency from collecting or attempting to collect on the debt

Borrowers may bring a private right of action if an agency fails to comply with the bill’s provisions, including a counterclaim against the lender or agency. Borrowers may be eligible to recover actual damages or $500, whichever is greater, restitution of all money taken or paid after a judgment was obtained, punitive damages, and attorney fees and court costs.

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