Student Borrower Credit Improvement Act
Bill: H.R.4119 | Sponsor: Rep. Pressley, Ayanna (D-MA)
Policy area: Finance and Financial Sector

Summary:
Student Borrower Credit Improvement Act
This bill prohibits a consumer reporting agency from furnishing a consumer report containing any adverse item of information relating to a delinquent or defaulted private education loan of a borrower who has a specified demonstrated history of loan repayment.

To amend the Fair Credit Reporting Act to remove adverse information 
 for certain defaulted or delinquent private education loan borrowers 
  who demonstrate a history of loan repayment, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Borrower Credit Improvement 
Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The October 2014 report of the Bureau of Consumer 
        Financial Protection titled ``Annual Report of the CFPB Student 
        Loan Ombudsman'' noted many private education loan borrowers, 
        who sought to negotiate a modified repayment plan when they 
        were experiencing a period of financial distress, were unable 
        to get assistance from their loan holders, which often 
        resulting in them defaulting on their loans. This pattern 
        resembles the difficulty that a significant number of mortgage 
        loan borrowers experienced when they sought to take responsible 
        steps to work with their mortgage loan servicer to avoid 
        foreclosure during the Great Recession.
            (2) Although private student loan holders may allow a 
        borrower to postpone payments while enrolled in school full-
        time, many limit this option to a certain time period, usually 
        48 to 66 months. This limited time period may not be sufficient 
        for those who need additional time to obtain their degree or 
        who want to continue their education by pursing a graduate or 
        professional degree. The Bureau of Consumer Financial 
        Protection found that borrowers who were unable to make 
        payments often defaulted or had their accounts sent to 
        collections before they were even able to graduate.

SEC. 3. REMOVAL OF ADVERSE INFORMATION FOR CERTAIN PRIVATE EDUCATION 
              LOAN BORROWERS.

    (a) In General.--The Fair Credit Reporting Act (15 U.S.C. 1681 et 
seq.) is amended by inserting after section 605B the following new 
section:
``Sec. 605C. Credit rehabilitation for distressed private education 
              loan borrowers.
    ``(a) In General.--A consumer reporting agency may not furnish any 
consumer report containing any adverse item of information relating to 
a delinquent or defaulted private education loan of a borrower if the 
borrower has rehabilitated the borrower's credit with respect to such 
loan by making 9 on-time monthly payments (in accordance with the terms 
and conditions of the borrower's original loan agreement or any other 
repayment agreement that antedates the original agreement) during a 
period of 10 consecutive months on such loan after the date on which 
the delinquency or default occurred.
    ``(b) Interruption of 10-Month Period for Certain Consumers.--
            ``(1) Permissible interruption of the 10-month period.--A 
        borrower may stop making consecutive monthly payments and be 
        granted a grace period after which the 10-month period 
        described in subsection (a) shall resume. Such grace period 
        shall be provided under the following circumstances:
                    ``(A) With respect to a borrower who is a member of 
                the Armed Forces entitled to incentive pay for the 
                performance of hazardous duty under section 301 of 
                title 37, United States Code, hazardous duty pay under 
                section 351 of such title, or other assignment or 
                special duty pay under section 352 of such title, the 
                grace period shall begin on the date on which the 
                borrower begins such assignment or duty and end on the 
                date that is 6 months after the completion of such 
                assignment or duty.
                    ``(B) With respect to a borrower who resides in an 
                area affected by a major disaster or emergency declared 
                under the Robert T. Stafford Disaster Relief and 
                Emergency Assistance Act, the grace period shall begin 
                on the date on which the major disaster or emergency 
                was declared and end on the date that is 3 months after 
                such date.
            ``(2) Other circumstances.--
                    ``(A) In general.--The Bureau may allow a borrower 
                demonstrating hardship to stop making consecutive 
                monthly payments and be granted a grace period after 
                which the 10-month period described in subsection (a) 
                shall resume.
                    ``(B) Borrower demonstrating hardship defined.--In 
                this paragraph, the term `borrower demonstrating 
                hardship' means a borrower or a class of borrowers who, 
                as determined by the Bureau, is facing or has 
                experienced unusual extenuating life circumstances or 
                events that result in severe financial or personal 
                barriers such that the borrower or class of borrowers 
                does not have the capacity to comply with the 
                requirements of subsection (a).
    ``(c) Procedures.--The Bureau shall establish procedures to 
implement the credit rehabilitation described in this section, 
including--
            ``(1) the manner, content, and form for requesting credit 
        rehabilitation;
            ``(2) the method for validating that the borrower is 
        satisfying the requirements of subsection (a);
            ``(3) the manner, content, and form for notifying the 
        private educational loan holder of--
                    ``(A) the borrower's participation in credit 
                rehabilitation under subsection (a);
                    ``(B) the requirements described in subsection (d); 
                and
                    ``(C) the restrictions described in subsection (f);
            ``(4) the manner, content, and form for notifying a 
        consumer reporting agency of--
                    ``(A) the borrower's participation in credit 
                rehabilitation under subsection (a); and
                    ``(B) the requirements described in subsection (d);
            ``(5) the method for verifying whether a borrower qualifies 
        for the grace period described in subsection (b); and
            ``(6) the manner, content, and form of notifying a consumer 
        reporting agency and private educational loan holder that a 
        borrower was granted a grace period.
    ``(d) Standardized Reporting Codes.--A consumer reporting agency 
shall develop standardized reporting codes for use by any private 
educational loan holder to identify and report a borrower's status of 
making and completing 9 on-time monthly payments during a period of 10 
consecutive months on a delinquent or defaulted private education loan, 
including codes specifying the grace period described in subsection (b) 
and any agreement to modify monthly payments. Such codes shall not 
appear on any report provided to a third party, and shall be removed 
from the consumer's credit report upon the consumer's completion of the 
rehabilitation period under this section.
    ``(e) Elimination of Barriers to Credit Rehabilitation.--A consumer 
report in which a private educational loan holder furnishes the 
standardized reporting codes described in subsection (d) to a consumer 
reporting agency, or in which a consumer reporting agency includes such 
codes, shall be deemed to comply with the requirements for accuracy and 
completeness under sections 623(a)(1) and 630.
    ``(f) Prohibition on Civil Actions for Consumers Pursuing 
Rehabilitation.--A private educational loan holder may not commence or 
proceed with any civil action against a borrower with respect to a 
delinquent or defaulted loan during the period of rehabilitation if the 
private educational loan holder has been notified, in accordance with 
the procedures established by the Bureau pursuant to subsection (c)--
            ``(1) of such borrower's intent to participate in 
        rehabilitation;
            ``(2) that such borrower has satisfied the requirements 
        under subsection (a); or
            ``(3) that such borrower was granted a grace period.
    ``(g) Impact on Statute of Limitations for Prior Debt.--Payments by 
a borrower on a private education loan that are made during and after a 
period of rehabilitation under this section shall have no effect on the 
statute of limitations with respect to payments that were due on such 
private education loan before the beginning of the period of 
rehabilitation.
    ``(h) Payment Plans.--If a private educational loan holder enters 
into a payment plan with a borrower on a private education loan during 
a period of rehabilitation, such payment plan shall be reasonable and 
affordable, as determined by the Bureau.
    ``(i) Rules of Construction.--
            ``(1) Application to subsequent default or delinquency.--A 
        borrower who satisfies the requirements under subsection (a) 
        shall be eligible for additional credit rehabilitation 
        described in subsection (a) with respect to any subsequent 
        default or delinquency of the borrower on the rehabilitated 
        private education loan.
            ``(2) Interruption of consecutive payment period 
        requirement.--The grace period described in subsection 
        (b)(1)(A) shall not apply if any regulation promulgated under 
        section 987 of title 10, United States Code (commonly known as 
        the Military Lending Act), or the Servicemembers Civil Relief 
        Act (50 U.S.C. App. 501 et seq.) allows for a grace period or 
        other interruption of the 10-month period described in 
        subsection (a) and such grace period or other interruption is 
        longer than the period described in subsection (b)(1)(A) or 
        otherwise provides greater protection or benefit to the 
        borrower who is a member of the Armed Forces.''.
    (b) Conforming Amendment.--Section 623(a)(1) of the Fair Credit 
Reporting Act (15 U.S.C. 1681s-2(a)(1)) is amended by striking 
subparagraph (E).
    (c) Table of Contents Amendment.--The table of contents of the Fair 
Credit Reporting Act is amended by inserting after the item relating to 
section 605B the following new item:

``605C. Credit rehabilitation for distressed private education loan 
                            borrowers.''.

SEC. 4. PRIVATE EDUCATION LOAN DEFINITIONS.

    Section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a) is 
amended by adding at the end the following new subsection:
    ``(bb) Private Education Loan Definitions.--The terms `private 
education loan' and `private educational lender' have the meanings 
given such terms, respectively, in section 140(a) of the Truth in 
Lending Act.''.

SEC. 5. RULEMAKING.

    Except as otherwise provided, the Bureau of Consumer Financial 
Protection shall, not later than the end of the 2-year period beginning 
on the date of the enactment of this Act, issue final rules to 
implement the amendments made by this Act.
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