Insurance Committee overwhelmingly approves Vitelli’s bill to curtail predatory student loan practices
AUGUSTA — The Legislature’s Insurance and Financial Affairs Committee voted on Thursday to recommend the passage of LD 1507, a bill that would rein in predatory student loan servicers and protect borrowers 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. I am thrilled that colleagues in both parties on the committee saw the importance of these protections.”
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 (BCCP). The amended version of the bill creates a registration procedure for lenders, which requires they submit an application to the Superintendent Maine BCCP for approval. It also requires lenders to comply with federal law and identifies prohibited acts for lenders — including misleading student loan borrowers and fraud — and allows the Superintendent to investigate student loan servicers to ensure compliance with the law.
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 of last year, 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.”
LD 1507 moves forward in the wake of claims made this week by U.S. Secretary of Education Betsy Devos that the federal government has the sole authority to oversee student loan servicers.
“Our state has a strong interest in protecting consumers from practices that are flat out unfair. Mainers should not wait for the federal government to take action,” said Sen. Vitelli.
The bill — which has been the subject of extensive work by Sen. Vitell and members of Insurance and Financial Affairs Committee over the past year — has received the support of CFPB Assistant Director and Student Loan Ombudsman Seth Frotman, AARP Maine, Coastal Enterprises, Inc. and the Maine Center for Economic Policy.
LD 1507 will go before the full Legislature in the coming weeks.
###