Relates to private education debt reporting

• Democratic1

◆ The sponsor's argument

Why James Sanders Jr. says this is needed

In New York, consumer lenders are not required to be licensed unless the loan is both smaller than $25,000 and at a rate above 16 percent.' Even subprime loans generally have interest rates below 16 percent. As a result, private education creditors who do not meet licensing require- ments operate below the Department of Financial Services' radar. This makes information related to private education debts originated to New Yorker borrowers at rates below 16 percent scarce. Additionally, private education creditors that are regulated by DFS are not required to specifically report on their education debt portfolios. Further, there is increasing national scrutiny of school-based debt collection and the role of institutions of higher education as creditors. The federal Consumer Financial Protection Bureau began to examine school-based lend- ing in 2022 and determined that transcript withholding as a means of collecting these debts is "abusive" in violation of federal consumer protection law. New York State in 2022 prohibited the practice of tran- script withholding at all schools in the state, which serves as a debt collection tactic for school-based education debt but has not taken any additional steps to study or regulate these debts themselves. Whereas federal student loan terms are set by federal law, and whereas data about the federal student loan market are regularly published by the federal government, the lack of consistently available data related to private education debt and the variety of persons that act as private education creditors means that we do not know the full size of the market, trends in origination, terms and conditions of debts, differ- ences in finance costs across demographic groups, default rates, rates of cosigning, prevalence of private student debt and repayment outcomes among older consumers, or outcomes related to student loan servicing. Any data that are available are extrapolations. To address this lack of data, Colorado, Maine, California, Louisiana, Maryland, and Illinois require private education creditors to annually submit data to financial regulators. This bill would require New York's servicers to report similar data. This bill amends L.2024 c.627 to specify that the Department of Finan- cial Services must report data from licensed student loan servicers rather than from the creditors directly. This bill is a negotiated change to the underlying chapter.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.