Source: https://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&mc=true&n=sp34.3.674.c&r=SUBPART&ty=HTML
Timestamp: 2019-10-23 14:14:37
Document Index: 284778256

Matched Legal Cases: ['art 674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674', '§674']

Title 34 → Subtitle B → Chapter VI → Part 674 → Subpart C
§674.41 Due diligence—general requirements.
§674.43 Billing procedures.
§674.44 Address searches.
§674.45 Collection procedures.
§674.46 Litigation procedures.
§674.47 Costs chargeable to the Fund.
§674.48 Use of contractors to perform billing and collection or other program activities.
§674.49 Bankruptcy of borrower.
§674.50 Assignment of defaulted loans to the United States.
Source: 52 FR 45555, Nov. 30, 1987, unless otherwise noted.
(a) General. Each institution shall exercise due diligence in collecting loans by complying with the provisions in this subpart. In exercising this responsibility, each institution shall, in addition to complying with the specific provisions of this subpart—
(1) Keep the borrower informed, on a timely basis, of all changes in the program that affect his or her rights or responsibilities; and
(b) Coordination of information. An institution shall ensure that information available in its offices (including the admissions, business, alumni, placement, financial aid and registrar's offices) is provided to those offices responsible for billing and collecting loans, in a timely manner, as needed to determine—
(1) The enrollment status of the borrower;
(2) If the institution does not use a coupon system, it shall send to the borrower—
(b)(1) An institution shall send a first overdue notice within 15 days after the due date for a payment if the institution has not received—
(2) Subject to §674.47(a), the institution may assess a late charge for loans made for periods of enrollment beginning on or after January 1, 1986, during the period in which the institution takes any steps described in this section to secure—
(3) The institution shall determine the amount of the late charge imposed for loans described in paragraph (b)(2) of this section based on either—
(5) The institution—
(i) Shall determine the amount of the late or penalty charge imposed on loans not described in paragraph (b)(2) of this section in accordance with §674.31(b)(5) (See appendix E); and
(6) The institution shall notify the borrower of the amount of the charge it has imposed, and whether the institution—
(d) Notwithstanding paragraphs (b) and (c) of this section, an institution may send a borrower a final demand letter if the institution has not within 15 days after the due date received a payment, or a request for deferment. postponement, or cancellation, and if—
(e)(1) An institution that accelerates a loan as provided in §674.31 (i.e., makes the entire outstanding balance of the loan, including accrued interest and any applicable late charges, payable immediately) shall—
(g)(1) An institution shall ensure that any funds collected as a result of billing the borrower are—
(i) Deposited in interest-bearing bank accounts that are—
[52 FR 45555, Nov. 30, 1987, as amended at 53 FR 49147, Dec. 6, 1988; 57 FR 32346, July 21, 1992; 59 FR 61412, Nov. 30, 1994; 64 FR 58315, Oct. 28, 1999; 67 FR 67077, Nov. 1, 2002]
(a) If mail, other than unclaimed mail, sent to a borrower is returned undelivered, an institution shall take steps to locate the borrower. These steps must include—
(b) If an institution is unable to locate a borrower by the means described in paragraph (a) of this section, it shall—
(d) If the institution is unable to locate the borrower after following the procedures in paragraphs (a) and (b) of this section, the institution shall make reasonable attempts to locate the borrower at least twice a year until—
[52 FR 45555, Nov. 30, 1987, as amended at 59 FR 61412, Nov. 30, 1994]
(a) The term “collection procedures,” as used in this subpart, includes that series of more intensive efforts, including litigation as described in §674.46, to recover amounts owed from defaulted borrowers who do not respond satisfactorily to the demands routinely made as part of the institution's billing procedures. If a borrower does not satisfactorily respond to the final demand letter or the following telephone contact made in accordance with §674.43(f), the institution shall—
(c)(1) If the institution, or the firm it engages, pursues collection activity for up to 12 months and does not succeed in converting the account to regular repayment status, or the borrower does not qualify for deferment, postponement, or cancellation on the loan, the institution shall—
(d) If the institution is unable to place the loan in repayment as described in paragraph (c)(1) of this section after following the procedures in paragraphs (a), (b), and (c) of this section, the institution shall continue to make annual attempts to collect from the borrower until—
(2) The institution shall determine the amount of collection costs that shall be charged to the borrower for actions required under this section, and §§674.44, 674.46, 674. 48, and 674.49, based on either—
(3) For loans placed with a collection firm on or after July 1, 2008, reasonable collection costs charged to the borrower may not exceed—
(f)(1) An institution shall ensure that any funds collected from the borrower are—
(a)(1) If the collection efforts described in §674.45 do not result in the repayment of a loan, the institution shall determine at least once every two years whether—
(i) The total amount owing on the borrower's account, including outstanding principal, accrued interest, collection costs and late charges on all of the borrower's Federal Perkins, NDSL and National Defense Student Loans held by that institution, is more than $500;
(ii) The borrower can be located and served with process;
(iii)(A) The borrower has sufficient assets attachable under State law to satisfy a major portion of the oustanding debt; or
(B) The borrower has income from wages or salary which may be garnished under applicable State law sufficient to satisfy a major portion of the debt over a reasonable period of time;
(iv) The borrower does not have a defense that will bar judgment for the institution; and
(v) The expected cost of litigation, including attorney's fees, does not exceed the amount which can be recovered from the borrower.
(2) The institution shall sue the borrower if it determines that the conditions in paragraph (a)(1) of this section are met.
(3) The institution may sue a borrower in default, even if the conditions in paragraph (a)(1) of this section are not met.
(b) The institution shall assess against and attempt to recover from the borrower—
(1) All litigation costs, including attorney's fees, court costs and other related costs, to the extent permitted under applicable law; and
(2) All prior collection costs incurred and not yet paid by the borrower.
(c)(1) An institution shall ensure that any funds collected as a result of litigation procedures are—
(d) If the institution is unable to collect the full amount owing on the loan after following the procedures set forth in §§674.41 through 674.46, the institution may—
(1) Submit the account to the Secretary for assignment in accordance with the procedures in §674.50; or
(2) With the Secretary's approval, refer the account to the Department for collection.
(a) General: Billing costs. (1) Except as provided in paragraph (c) of this section, the institution shall assess against the borrower, in accordance with §674.43(b)(2) the cost of actions taken with regard to past-due payments on the loan.
(2) If the amount recovered from the borrower does not suffice to pay the amount of the past-due payments and the penalty or late charges, the institution may charge the Fund for only that unpaid portion of the cost of telephone calls to the borrower made pursuant to §674.43 to demand payment of overdue amounts on the loan.
(b) General: Collection costs. (1) Except as provided in paragraph (d) of this section, the institution shall assess against the borrower, in accordance with §§674.45(e) and 674.46(b), the costs of actions taken on the loan obligation pursuant to §§674.44, 674.45, 674.46, 674.48 and 674.49.
(c) Waiver: Late charges. The institution may waive late charges assessed against a borrower who repays the full amount of the past-due payments on a loan.
(d) Waiver: collection costs. Before filing suit on a loan, the institution may waive collection costs as follows:
(e) Limitations on costs charged to the Fund. The institution may charge to the Fund the following collection costs waived under paragraph (d) of this section or not paid by the borrower:
(1) A reasonable amount for the cost of a successful address search required in §674.44(b).
(2) Costs related to the use of credit bureaus as provided in §674.45(b)(1).
(3) For first collection efforts pursuant to §674.45(a)(2), an amount that does not exceed 30 percent of the amount of principal, interest and late charges collected.
(4) For second collection efforts pursuant to §674.45(c)(1)(ii), an amount that does not exceed 40 percent of the amount of principal, interest and late charges collected.
(5) Until July 1, 2002 on loans rehabilitated pursuant to §674.39, amounts that exceed the amounts specified in §674.39(c)(1) but are less than—
(i) 30 percent if the loan was rehabilitated while in a first collection effort; or
(6) For collection costs resulting from litigation, including attorney's fees, an amount that does not exceed the sum of—
(i) Court costs specified in 28 U.S.C. 1920;
(ii) Other costs incurred in bankruptcy proceedings in taking actions required or authorized under §674.49;
(f) Records. For audit purposes, an institution shall support the amount of collection costs charged to the Fund with appropriate documentation, including telephone bills and receipts from collection firms. The documentation must be maintained in the institution's files as provided in §674.19.
(g) Cessation of collection activity of defaulted accounts. An institution may cease collection activity on a defaulted account with a balance of less than $200, including outstanding principal, accrued interest, collection costs, and late charges, if—
(1) The institution has carried out the due diligence procedures described in subpart C of this part with regard to this account; and
(h) Write-offs of accounts. (1) Notwithstanding any other provision of this subpart, an institution may write off an account, including outstanding principal, accrued interest, collection costs, and late charges, with a balance of—
(ii) Less than $50 if, for a period of at least 2 years, the borrower has been billed for this balance in accordance with §674.43(a).
(c) If an institution uses a billing service to carry out billing procedures under §674.43, the institution shall ensure that the service—
(1) Provides at least quarterly, a statement to the institution which shows—
(i) Its activities with regard to each borrower;
(4)(i) Instructs the borrower to remit payment directly to the institution;
(d) If the institution uses a collection firm, the institution shall ensure that the firm—
(1)(i) Instructs the borrower to remit payment directly to the institution;
(iii) Deposits those funds received directly from the borrower immediately in an institutional trust account that must be an interest-bearing account if those funds will be held for longer than 45 days, after deducting its fees if authorized to do so by the institution; and
(2) Provides at least quarterly, a statement to the institution which shows—
(e) If an institution uses a billing service to carry out §674.43 (billing procedures), it may not use a collection firm that—
(1) Owns or controls the billing service;
(f)(1) An institution that employs a third party to perform billing or collection services required under this subpart shall ensure that the party has and maintains in effect a fidelity bond or comparable insurance in accordance with the requirements of this paragraph.
(3) In the institution authorizes the third party performing collection services to deduct its fees from payments from borrowers, the institution shall ensure that—
(i) If the amount of funds that the institution reasonably expects to be paid over a two-month period on accounts it refers to the party is less than $100,000, the party is bonded or insured in an amount equal to the lesser of—
(A) Ten times the amount of funds that the institution reasonably expects to be repaid over a two-month period on accounts it refers to the party; or
(ii) If the amount of funds that the institution reasonably expects to be repaid over a two-month period on accounts it refers to the party is more than $100,000, the institution shall ensure that the party has and maintains in effect a fidelity bond or comparable insurance—
(A) Naming the institution as beneficiary; and
(a) General. If an institution receives notice that a borrower has filed a petition for relief in bankruptcy, usually by receiving a notice of meeting of creditors, the institution and its agents shall immediately suspend any collection efforts outside the bankruptcy proceeding against the borrower.
(c) Borrower's request for determination of dischargeability. (1) The institution must use due diligence and may assert any defense consistent with its status under applicable law to avoid discharge of the loan. The institution must follow the procedures in this paragraph to respond to a complaint for a determination of dischargeability under 11 U.S.C. 523(a)(8) on the ground that repayment of the loan would impose an undue hardship on the borrower and his or her dependents, unless discharge would be more effectively opposed by avoiding that action.
(5) If the expected costs of opposing discharge of such a loan do not exceed one-third of the total amount owed on the loan, the institution shall—
(e) Chapter 13 repayment plan. (1) The institution shall follow the procedures in this paragraph in response to a repayment plan proposed by a borrower who has filed for relief under chapter 13 of the Bankruptcy Code.
(2) The institution is not required to respond to a proposed repayment plan, if—
(3)(i) If the borrower proposes under the repayment plan to repay less than the total amount owed on the loan, the institution shall determine from its own records and court documents—
(ii) If the institution reasonably expects that costs of the appropriate actions will not exceed one-third of the dischargeable loan debt, the institution shall—
(4)(i) The institution must monitor the borrower's compliance with the requirements of the plan confirmed by the court. If the institution determines that the debtor has not made the payments required under the plan, or has filed a request for a “hardship discharge” under 11 U.S.C. 1328(b), the institution must determine from its own records and information derived from documents filed with the court—
(ii) If the institution reasonably expects that costs of the appropriate actions, when added to the costs already incurred in taking actions authorized under this section, will not exceed one-third of the dischargeable loan debt, the institution shall—
(f) Resumption of collection from the borrower. The institution shall resume billing and collection action prescribed in this subpart after—
(1) The borrower's petition for relief in bankruptcy has been dismissed;
(2) The borrower has received a discharge under 11 U.S.C. 727, 11 U.S.C. 1141, or 11 U.S.C. 1228, unless—
(i) The court has found that repayment of the loan would impose an undue hardship on the borrower and the dependents of the borrower; or
(ii)(A) The petition for relief was filed before October 8, 1998;
(3) The borrower has received a discharge under 11 U.S.C. 1328(a) or 1328(b), unless—
(g) Termination of collection and write-off. (1) An institution must terminate all collection action and write off a loan if it receives a general order of discharge—
(i) In a bankruptcy in which the borrower filed for relief before October 8, 1998, if the loan entered the repayment period more than seven years (exclusive of any applicable suspension of the repayment period defined by 34 CFR 682.402(m)) from the date on which a petition for relief was filed; or
[52 FR 45555, Nov. 30, 1987, as amended at 53 FR 49147, Dec. 6, 1988; 57 FR 32346, July 21, 1992; 59 FR 1652, Jan. 12, 1994; 59 FR 61412, Nov. 30, 1994; 64 FR 58313, Oct. 28, 1999; 65 FR 65614, Nov. 1, 2000]
(a) An institution may submit a defaulted loan note to the Secretary for assignment to the United States if—
(1) The institution has been unable to collect on the loan despite complying with the diligence procedures, including at least a first level collection effort as described in §674.45(a) and litigation, if required under §674.46(a), to the extent these actions were required by regulations in effect on the date the loan entered default;
(2) The amount of the borrower's account to be assigned, including outstanding principal, accrued interest, collection costs and late charges is $25.00 or greater; and
(3) The loan has been accelerated.
(b) An institution may submit a defaulted note for assignment only during the submission period established by the Secretary.
(1) An assignment form provided by the Secretary and executed by the institution, which must include a certification by the institution that it has complied with the requirements of this subpart, including at least a first level collection effort as described in §674.45(a) in attempting collection on the loan.
(2) The original promissory note or a certified copy of the original note.
(3) A copy of the repayment schedule.
(4) A certified copy of any judgment order entered on the loan.
(5) A complete statement of the payment history.
(6) Copies of all approved requests for deferment and cancellation.
(7) A copy of the notice to the borrower of the effective date of acceleration and the total amount due on the loan.
(8) Documentation that the institution has withdrawn the loan from any firm that it employed for address search, billing, collection or litigation services, and has notified that firm to cease collection activity on the loans.
(9) Copies of all pleadings filed or received by the institution on behalf of a borrower who has filed a petition in bankruptcy and whose loan obligation is determined to be nondischargeable.
(10) Documentation that the institution has complied with all of the due diligence requirements described in paragraph (a)(1) of this section if the institution has a cohort default rate that is equal to or greater than 20 percent as of June 30 of the second year preceding the submission period.
(11) A record of disbursements for each loan made to a borrower on an MPN that shows the date and amount of each disbursement.
(12)(i) Upon the Secretary's request with respect to a particular loan or loans assigned to the Secretary and evidenced by an electronically signed promissory note, the institution that created the original electronically signed promissory note must cooperate with the Secretary in all activities necessary to enforce the loan or loans. Such institution must provide—
(A) An affidavit or certification regarding the creation and maintenance of the electronic records of the loan or loans in a form appropriate to ensure admissibility of the loan records in a legal proceeding. This affidavit or certification may be executed in a single record for multiple loans provided that this record is reliably associated with the specific loans to which it pertains; and
(B) Testimony by an authorized official or employee of the institution, if necessary, to ensure admission of the electronic records of the loan or loans in the litigation or legal proceeding to enforce the loan or loans.
(ii) The affidavit or certification in paragraph (c)(12)(i)(A) of this section must include, if requested by the Secretary—
(A) A description of the steps followed by a borrower to execute the promissory note (such as a flowchart);
(B) A copy of each screen as it would have appeared to the borrower of the loan or loans the Secretary is enforcing when the borrower signed the note electronically;
(C) A description of the field edits and other security measures used to ensure integrity of the data submitted to the originator electronically;
(D) A description of how the executed promissory note has been preserved to ensure that it has not been altered after it was executed;
(E) Documentation supporting the institution's authentication and electronic signature process; and
(F) All other documentary and technical evidence requested by the Secretary to support the validity or the authenticity of the electronically signed promissory note.
(iii) The Secretary may request a record, affidavit, certification or evidence under paragraph (a)(6) of this section as needed to resolve any factual dispute involving a loan that has been assigned to the Secretary including, but not limited to, a factual dispute raised in connection with litigation or any other legal proceeding, or as needed in connection with loans assigned to the Secretary that are included in a Title IV program audit sample, or for other similar purposes. The institution must respond to any request from the Secretary within 10 business days.
(iv) As long as any loan made to a borrower under a MPN created by an institution is not satisfied, the institution is responsible for ensuring that all parties entitled to access to the electronic loan record, including the Secretary, have full and complete access to the electronic loan record.
(d) Except as provided in paragraph (e) of this section, and subject to paragraph (g) of this section, the Secretary accepts an assignment of a note described in paragraph (a) of this section and submitted in accordance with paragraph (c) of this section.
(e) The Secretary does not accept assignment of a loan if—
(1) The institution has not provided the Social Security number of the borrower, unless the loan was made before September 13, 1982;
(2) The borrower has received a discharge in bankruptcy, unless—
(i) The bankruptcy court has determined that the loan obligation is nondischargeable and has entered judgment against the borrower; or
(ii) A court of competent jurisdiction has entered judgment against the borrower on the loan after the entry of the discharge order; or
(3) The institution has initiated litigation against the borrower, unless the judgment has been entered against the borrower and assigned to the United States.
(f)(1) The Secretary provides an institution written notice of the acceptance of the assignment of the note. By accepting assignment, the Secretary acquires all rights, title, and interest of the institution in that loan.
(2) The institution shall endorse and forward to the Secretary any payment received from the borrower after the date on which the Secretary accepted the assignment, as noted in the written notice of acceptance.
(g)(1) The Secretary may determine that a loan assigned to the United States is unenforceable in whole or in part because of the acts or omissions of the institution or its agent. The Secretary may make this determination with or without a judicial determination regarding the enforceability of the loan.
(2) The Secretary may require the institution to reimburse the Fund for that portion of the outstanding balance on a loan assigned to the United States which the Secretary determines to be unenforceable because of an act or omission of that institution or its agent.
(3) Upon reimbursement to the Fund by the institution, the Secretary shall transfer all rights, title and interest of the United States in the loan to the institution for its own account.
(h) An institution shall consider a borrower whose loan has been assigned to the United States for collection to be in default on that loan for the purpose of eligibility for title IV financial assistance, until the borrower provides the institution confirmation from the Secretary that he or she has made satisfactory arrangements to repay the loan.