Insurance Committee unanimously approves Vitelli’s bill to curtail predatory student loan practices
AUGUSTA — The Legislature’s Insurance and Financial Affairs Committee voted unanimously on Thursday to recommend the passage of LD 1507, a bill that would rein in predatory student loan servicers and protect borrowers by creating a “Student Loan Bill of Rights” in Maine.
The bill, “An Act to Establish a Student Loan Bill of Rights To License and Regulate Student Loan Servicers,” is sponsored by Sen. Eloise Vitelli, D-Arrowsic.
“If we’re serious about retaining and attracting young people in our state, we need to address the student debt crisis that’s already holding back a whole generation of young adults,” said Sen. Vitelli. “This bill provides one flank in the attack against crippling college debt, and I urge my fellow legislators to support it.”
Student loan debt has become one of the defining problems facing a generation of students and graduates in Maine and across the country. According to the federal Consumer Financial Protection Bureau, or CFPB, more than 40 million borrowers have student loan debt nationwide, with a total volume of over $1.4 trillion of outstanding debt.
Sen. Vitelli’s legislation creates a “Student Loan Bill of Rights,” a statute that makes several changes within the Maine Bureau of Consumer Credit Protection. The amended version of the bill creates a licensing procedure for lenders, which requires they submit an application and undergo investigation by Maine BCCP. It also requires lenders to comply with federal law, identifies prohibited acts for lenders, and identifies the duties of the superintendent with regard to investigation of lenders.
Too many borrowers are faced with flat out rejection when they seek refinancing or forgiveness through current programs. As a result, high payments and high interest rates are crushing borrowers and leaving them no choice but to default or continue paying unsustainable amounts of money from their monthly budget. More than 3,800 complaints have been submitted to the CFPB, documenting refusals from lenders to refinance or consolidate loans.
In January, loan servicer Navient Solutions, LLC was sued by the CFPB for deceiving customers to save operating costs. CFPB Director Richard Cordray said that Navient chose to shortcut and deceive consumers “at every stage of repayment.”
At the public hearing last week, the bill received the support of CFPB Assistant Director and Student Loan Ombudsman Seth Frotman, AARP Maine, Coastal Enterprises, Inc., the Maine Center for Economic Policy, and several students who testified in its support.
The bill is one of two sponsored by Vitelli that aim to make reforms to higher education and student loans. The other bill, LD 1404, received unanimous support of the Education and Cultural Affairs Committee last week.
LD 1507 will go before the full Legislature in the coming weeks.