Student Loan Transfers Disclosure Act of 2015

To amend the Truth in Lending Act to include requirements for the transfer of servicing of postsecondary education loans, and for other purposes. 1. Short title This Act may be cited as the Student Loan Transfers Disclosure Act of 2015 2. Improved consumer protections for student loan servicing (a) In general Chapter 2 of title I of the Truth in Lending Act ( 15 U.S.C. 1601 et seq. 140B. Transfer of servicing of postsecondary education loans (a) Transfer of servicing (1) Disclosure required A postsecondary education lender shall disclose to each person who applies for a postsecondary education loan, at the time of application for such loan, whether there may be a transfer of servicing of such loan at any time during which a balance is due on such loan. (2) No liability A postsecondary education lender shall not be liable to a borrower for failure to comply with paragraph (1) if the application for a postsecondary education loan was made before the rules or regulations established under subsection (f) take effect. (b) Notice by transferor servicer at time of transfer of servicing (1) In general A transferor servicer shall notify the borrower under a postsecondary education loan of any transfer of student loan servicing for the postsecondary education loan. Such notice shall be made to the borrower— (A) not later than 15 days before the effective date of transfer of the student loan servicing; or (B) not more than 30 days after the effective date of transfer of the student loan servicing, if the transfer of such servicing is preceded by— (i) termination of the contract for such servicing for cause; (ii) commencement of bankruptcy proceedings of the transferor servicer; or (iii) any other situation in which the Bureau determines that such exception is warranted. (2) Contents of notice The notice required under paragraph (1) shall be made in writing and, if the transferor servicer has an email address for the borrower, sent by email, and shall include— (A) the effective date of the transfer; (B) the name, address, website, and toll-free or collect-call telephone number of the transferee servicer; (C) a toll-free or collect-call telephone number for an individual employed by the transferor servicer, or the office or department of, the transferor servicer that the borrower may contact for inquiries relating to the transfer of servicing; (D) the name and toll-free or collect-call telephone number for an individual employed by the transferee servicer, or the office or department of, the transferee servicer that the borrower may contact for inquiries relating to the transfer of servicing; (E) the date on which the transferor servicer will stop accepting payments relating to the postsecondary education loan to be transferred and the date on which the transferee servicer will begin to accept such payments; (F) a statement that the transfer of student loan servicing of the postsecondary education loan does not affect any term or condition of the postsecondary education loan other than terms directly related to such student loan servicing; (G) a statement disclosing— (i) whether borrower authorization for recurring electronic funds transfers will be transferred to the transferee servicer; and (ii) if any such recurring electronic funds transfers cannot be transferred, information as to how the borrower may establish new recurring electronic funds transfers in connection with transfer of servicing to the transferee servicer; (H) a statement disclosing— (i) the application of all payments and charges relating to the postsecondary education loan to be transferred as of the effective date of the transfer, including— (I) the date the last payment of the borrower was received; (II) the date the last late fee, arrearage, or other charge was applied; and (III) the amount of the last payment allocated to principal, interest, and other charges; (ii) the status of such loan as of the effective date of the transfer, including whether the borrower is in default on the loan; (iii) whether any application for an alternative repayment arrangement submitted by the borrower is pending; and (iv) an itemization and explanation for all arrearages claimed to be due as of the effective date of the transfer; (I) a detailed description of any benefit, alternative repayment arrangement, or other term or condition arranged between the transferor servicer and the borrower that is not included in the terms of the loan agreement; (J) a detailed description of any item under subparagraph (H) that will not apply upon transfer, including an explanation of why such item will not apply; and (K) information on how to file a complaint against the transferor servicer with the Bureau. (3) Notice by transferee servicer at time of transfer of servicing (A) In general A transferee servicer shall notify the borrower under a postsecondary education loan, in writing, of any transfer of student loan servicing of a postsecondary education loan. Such notice shall be made to the borrower— (i) not later than 15 days before the effective date of transfer of the student loan servicing; or (ii) not more than 30 days after the effective date of transfer of the student loan servicing, if the transfer of such servicing is preceded by— (I) termination of the contract for such servicing for cause; (II) commencement of bankruptcy proceedings of the transferor servicer; or (III) any other situation in which the Bureau determines that such exception is warranted. (B) Contents of notice The notice required under subparagraph (A) shall be made in the same manner and include the same information, as applicable, as described in paragraph (2). (c) Treatment of improperly received loan payments during transfer period (1) In general During the 60-day period beginning on the effective date of transfer relating to a postsecondary education loan to be transferred, a late fee may not be imposed on the borrower with respect to any payment on such loan, and no such payment may be treated as late for any other purposes if— (A) the payment is received by the transferor servicer instead of the transferee servicer (who should properly receive payment) before the due date applicable to such payment; or (B) the payment is received by the transferee servicer instead of the transferor servicer (who should properly receive payment) before the transfer is complete. (2) Notice To the maximum extent practicable, a transferor servicer shall notify a borrower, both in writing and by telephone, regarding any payment described in paragraph (1). (d) Electronic fund transfer authority A transferee servicer shall make available to a borrower whose student loan servicing is transferred to the transferee servicer a simple, online process through which the borrower may transfer to the transferee servicer any existing authority for an electronic fund transfer that the borrower had provided to the transferor servicer. (e) Servicer liability (1) Effective date of regulations A student loan servicer shall not be liable to a borrower for failure to comply with the requirements of subsection (b) with respect to a transfer of student loan servicing before the regulations under subsection (f) take effect. (2) Mitigating action A student loan servicer or a postsecondary education lender shall not be liable to a borrower for failure to comply with a requirement under this section if, not later than 60 days after discovering an error and before the commencement of an action under section 130 or the receipt of written notice of the error from the borrower, the student loan servicer notifies the borrower of the error and makes any adjustments in the appropriate account that are necessary to ensure that the borrower will not be required to pay an amount greater than the amount that the borrower otherwise would have paid. (f) Rulemaking The Bureau, in consultation with the Secretary of Education, is authorized to prescribe such rules and regulations, make such interpretations, and grant such reasonable exemptions, in accordance with, and as may be necessary to achieve the purposes of, this chapter. (g) Definitions In this section, the following definitions shall apply: (1) Alternative repayment arrangement The term alternative repayment arrangement (A) that is different than the terms of an existing postsecondary education loan arrangement or agreement; and (B) pursuant to which remittance of a monthly payment— (i) satisfies the terms of the postsecondary education loan; or (ii) is not required for a period of 1 or more months in order to satisfy the terms of the postsecondary education loan arrangement or agreement. (2) Effective date of transfer The term effective date of transfer (3) Federal Direct Loan The term Federal Direct Loan 20 U.S.C. 1087a et seq. (4) Federal Perkins Loan The term Federal Perkins Loan 20 U.S.C. 1087aa et seq. (5) Institution of higher education The term institution of higher education 20 U.S.C. 1002 (6) Late fee The term late fee (7) Loan holder The term loan holder (8) Postsecondary education expense The term postsecondary education expense 20 U.S.C. 1087ll (9) Postsecondary education lender The term postsecondary education lender (A) means— (i) a financial institution, as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 (ii) a Federal credit union, as defined in section 101 of the Federal Credit Union Act ( 12 U.S.C. 1752 (iii) any other person engaged in the business of soliciting, making, or extending postsecondary education loans; and (B) does not include— (i) the Secretary of Education; or (ii) an institution of higher education with respect to any Federal Perkins Loan made by the institution. (10) Postsecondary education loan The term postsecondary education loan (A) made, insured, or guaranteed under part B, D, or E of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1071 et seq. (B) issued or made by a postsecondary education lender and is— (i) extended to a borrower with the expectation that the amounts extended will be used in whole or in part to pay postsecondary education expenses; or (ii) extended for the purpose of refinancing or consolidating 1 or more loans described in subparagraph (A); or (C) a private education loan (as defined in section 140(a)). (11) Student loan servicer The term student loan servicer (A) means a person who performs student loan servicing; (B) includes a person performing student loan servicing for a postsecondary education loan on behalf of an institution of higher education or the Secretary of Education under a contract or other agreement; (C) does not include the Secretary of Education to the extent the Secretary directly performs student loan servicing for a postsecondary education loan; and (D) does not include an institution of higher education, to the extent that the institution directly performs student loan servicing for a Federal Perkins Loan made by the institution. (12) Student loan servicing The term student loan servicing (A) Receiving any scheduled periodic payments, or notification of such payments, from a borrower under a postsecondary education loan. (B) Applying payments described in subparagraph (A) to an account of the borrower pursuant to the terms of the postsecondary education loan or of the contract governing the servicing of the postsecondary education loan. (C) During a period in which no payment is required on the postsecondary education loan— (i) maintaining account records for the loan; and (ii) communicating with the borrower on behalf of the loan holder or, with respect to a Federal Direct Loan or Federal Perkins Loan, the Secretary of Education or the institution of higher education that made the loan, respectively. (D) Interacting with a borrower to facilitate the activities described in subparagraphs (A), (B), and (C), including activities to help prevent default by the borrower of the obligations arising from the postsecondary education loan. (13) Transfer of servicing The term transfer of servicing (14) Transferee servicer The term transferee servicer (15) Transferor servicer The term transferor servicer . (b) Table of contents amendment The table of contents for chapter 2 of title I of the Truth in Lending Act is amended by inserting after the item relating to section 140A the following new item: 140B. Transfer of servicing of postsecondary education loans. . 3. Amendments to the Higher Education Act of 1965 The Higher Education Act of 1965 ( 20 U.S.C. 1001 et seq. (1) in section 487(a) ( 20 U.S.C. 1094(a) (30) The institution will— (A) comply with the disclosure requirements for postsecondary education lenders under section 140B(a) of the Truth in Lending Act; and (B) ensure that each third party servicer with which the institution has entered into a contract complies with the applicable requirements for student loan servicers under section 140B of such Act. ; and (2) in section 463A(b) ( 20 U.S.C. 1087cc–1(b) (A) by striking and (B) by striking the period at the end of paragraph (9) and inserting ; and (C) by adding at the end the following: (10) the disclosures for postsecondary education lenders and student loan services under section 140B of the Truth in Lending Act. .

Summary: Student Loan Transfers Disclosure Act of 2015 This bill amends the Truth in Lending Act and the Higher Education Act of 1965 to establish requirements related to the transfer of servicing of postsecondary education loans. "Transfer of servicing" refers to the assignment, sale, or transfer of student loan servicing from one servicer to another. A postsecondary education lender must disclose to each loan applicant, at the time of application, whether there may be a transfer of servicing of the loan. Both the transferor servicer and the transferee servicer must provide specified notice of a transfer to the borrower within a certain timeframe. Loan payments improperly received by the transferor servicer instead of the transferee servicer (or vice versa) during the transfer period may not be treated as late. A transferee servicer shall make available a simple, online process through which the borrower may transfer any electronic fund transfer authority that the borrower had provided to the transferor servicer. The Consumer Financial Protection Bureau is authorized to establish regulations and grant reasonable exceptions in accordance with the bill. A lender shall not be liable to a borrower for failure to comply with the bill's disclosure and notice requirements with respect to events that occur before such regulations take effect. As a condition of eligibility for certain federal funding, an institution of higher education must ensure compliance with the bill's requirements.