Add Art 42 §§1100 - 1109, Gen Bus L; amd §§105 & 3213, add §3012-c, CPLR
Enacts protections for private education loan borrowers and cosigners; requires certain notifications from creditors and debt collectors; prohibits acceleration; enacts provisions for cosigner release.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3155
SPONSOR: Zebrowski TITLE OF BILL:
An act to amend the general business law and the civil practice law and
rules, in relation to protecting private education loan borrowers and
cosigners
PURPOSE GENERAL IDEA OF BILL:
To extend long-term protections to private student loan borrowers.
SUMMARY OF PROVISIONS:
Section one of the bill creates a new article 42 in the general business
law entitled "Private Education Loan Protections."
Section 1100 of the new article includes definitions for "private educa-
tion loan," "private education lender," "borrower," "cosigner,"
"original creditor," "creditor," "debt collector," and "higher education
expense."
Section 1101 of the new article states the applicability of this article
to private education lenders and any person or entity that contracts
with a private education lender or servicer to service the loan.
Section 1102 of the new article exempts banks, credit unions, and their
subsidiaries from the obligations of this article to the extent that
state regulation is preempted by federal law.
Section 1103 of the new article lists the provisions applicable to
cosigners. Lenders will need to provide cosigner applicants information
about their rights, annual notices regarding cosigner release, notifica-
tion when borrower and cosigner have met the requirements for cosigner
release, and timely notification if borrower has submitted an incomplete
application for cosigner release or if borrower and cosigner have been
approved or denied for cosigner release. Lenders shall not impose any
restrictions that permanently bar a borrower from qualifying from cosig-
ner release. The borrower has the right to request an appeal of a lend-
er's determination to deny the cosigner release. The lender must provide
the cosigner with access to all documents and records related to the
cosigned private education loan.
Section 1104 of the new article prohibits the acceleration of payments
on a private education loan.
Section 1105 of the new article requires that in the first debt
collection communication, the creditor or debt collector must provide
certain information to the borrower or cosigner including the name of
the owner of the private education loan debt, the original creditor's
name and account number, and the total outstanding amount owed. Other
documents include a schedule of all transactions to the account and a
copy of all pages of the contract.
Section 1106 requires creditors and debt collectors to have certain
information related to the private education loan debt in their
possession prior to collecting or attempting to collect the private
education loan debt.
Section 1007 of the new article states that all private education lend-
ers, creditors, and debt collectors shall comply with the provisions of
this article. A borrower or cosigner can bring an action against a
noncompliant creditor to recover or obtain actual damages, punitive
damages, attorney's fees, correction of that person's credit report,
injunctive relief, and any other relief the court deems proper. A
borrower or cosigner may seek the same relief described above, as well
as a court order vacating any judgment entered in violation of those new
requirements, for any violation of the new civil practice law and rules
requirements provided by section three of this bill. Additionally, if a
creditor or attorney files an affidavit containing false information,
the court must award treble damages. The Superintendent of Financial
Services or the Attorney General may also bring an action.
Section 1108 of the new article authorizes the superintendent of finan-
cial services to promulgate the rules and regulations of the article.
The superintendent is also authorized to make such rulings, demands, and
findings they deem necessary for the improper conduct of the private
education loan industry.
Section 1109 of the new article states that penalties may be brought
against violators of these provisions through civil action brought by
the attorney general.
Section two of the bill amends the definition of "original creditor"
found in section 105 of the civil practice law and rules so that, in the
case of an action arising from a private education loan only, that term
shall mean the name of the creditor listed on the original promissory
note or loan agreement.
Section three of the bill adds a new section to the civil practice law
and rules requiring plaintiffs or attorneys representing plaintiffs
filing a complaint to submit sworn affidavits. The affidavits must
attest that the plaintiff or attorney has all of the information neces-
sary to collect on the debt, has complied with the debt collection
communication requirements in section one of this bill, whether the debt
is eligible for income-based repayment plans, whether the debt likely
meets the definition of a qualified education loan under federal law,
that after reasonable inquiry the statute of limitations on the debt has
not expired, and that all of the information possessed and asserted is
accurate. The plaintiff or their attorney must provide the following
documentation attached to the application when seeking a judgment:
information that establishes that the creditor is the owner of the
specific individual private education loan at issue and a signed affida-
vit from each of the previous owners of the private education loan stat-
ing its default or acceleration status. A judge or Clerk of the court
may not grant or enter a judgment in action that fails to comply with
these requirements. If a borrower or cosigner sends written notice to a
creditor or debt collector disputing the creditor's or debt collector's
compliance with this section, the creditor or debt collector must prove
compliance to the court or move to vacate the judgment, refund all money
paid after the judgment was entered, and remove all negative credit
history.
Section four of the bill amends section 3213 of the provisions of the
civil practice law and rules, related to summary judgment in lieu of
complaint, to clarify that judgments sought pursuant to that provision
must still comply with the pleading and documentation requirements
provided in section three of this bill. Section five of the bill
includes a severability clause.
Section five of the bill contains a severability clause. Section six of
the bill states the effective date.
JUSTIFICATION:
Borrowers with private education loans face a wide range of unique chal-
lenges when managing student debt. These loans often have extremely high
interest rates and no flexible or affordable repayment options, leaving
borrowers with little recourse when faced with a financial shock or
unemployment. When borrowers fall behind on this debt, they often face
aggressive debt collection tactics and lawsuits, all without the benefit
of the type of bankruptcy protection available to consumers with other
types of debt.
Law enforcement officials have brought significant federal and state
litigation alleging predatory lending by the largest private education
lenders and alleging abusive collections, robo-signing, and illegal
pursuit of invalid debts by collectors, investors, and servicers. As
recently as March 5, 2021, in an action brought by the Washington Attor-
ney General, a judge found that one private student loan servicer,
Navient, violated the law by effectively barring cosigners from release
from their loans after having promoted the availability of release to
encourage consumers to cosign loans.
Specifically, the court found that, among other things, the company
counted payments in such a way that they were not considered to be on
time for the purpose of cosigner release, offered forbearances and other
borrowers assistances without informing the borrower or cosigner that
accepting would prevent the cosigner from being released, and generally
misrepresented the terms of cosigner release to borrowers and cosigners.
These cases expose significant, systemic flaws in the way the judicial
system approaches private education loan debts-setting up the most
vulnerable borrowers to face persistent financial distress in the
decades ahead.
As New York grapples with the economic fallout of the coronavirus
pandemic, student debt remains a financial anchor for more than two
million New Yorkers. The federal response to the pandemic has wholly
ignored the plight of private student loan borrowers, leaving them to
grapple with the predatory players that plague this sector of the
student loan market. But where the federal government has failed, New
York is stepping in.
The New York State Department of Financial Services (DFS) announced, on
April 7, 2020, that it negotiated with some of the largest private
student loan companies to offer relief to as many as 300,000 New Yorkers
struggling with private student loan debt. The proposed relief offered
up to 90 days of deferment and protections from negative credit report-
ing. However, this relief was only temporary and did not cover the
entire student loan market. Private student loan companies and creditors
have now resumed filing new lawsuits and continuing existing cases to
recover past-due debts, despite tens of thousands of people still out of
work or losing their jobs.
Additionally, some of these companies submit false or misleading legal
documents against the borrower to courts. The harmful effect of these
lawsuits, which often lack even the most-basic levels of documentation
and are disproportionately filed in majority-minority communities in New
York, were documented in a report issued in March 2021.
It is clear that student loan borrowers need long-term solutions as New
York works to recover from the pandemic. It is also clear that the
predatory conduct in the private student loan market centers around
specific types of misrepresentation and unfair practices, as well as
improper debt collection practices. This legislation creates protections
that specifically address these practices and would limit the economic
exploitation of vulnerable borrowers by ensuring that borrowers are
informed of any lender-specified repayment options and by creating
protections for new borrowers taking on debt.
PRIOR LEGISLATIVE HISTORY:
A.6226 of 2021-22.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None to the state.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
3155
2023-2024 Regular Sessions
IN ASSEMBLY
February 2, 2023
___________
Introduced by M. of A. ZEBROWSKI, SIMON, FORREST -- read once and
referred to the Committee on Consumer Affairs and Protection
AN ACT to amend the general business law and the civil practice law and
rules, in relation to protecting private education loan borrowers and
cosigners
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The general business law is amended by adding a new article
2 42 to read as follows:
3 ARTICLE 42
4 PRIVATE EDUCATION LOAN PROTECTIONS
5 Section 1100. Definitions.
6 1101. Applicability.
7 1102. Exempt organizations.
8 1103. Provisions applicable to cosigners.
9 1104. Prohibition on acceleration of payments on private educa-
10 tion loans.
11 1105. Required communications from creditors and debt collec-
12 tors.
13 1106. Required information to be provided by creditors and debt
14 collectors.
15 1107. Enforcement.
16 1108. Rules and regulations.
17 1109. Penalties.
18 § 1100. Definitions. As used in this article:
19 1. "Private education loan" means an extension of credit that:
20 (a) is not made, insured, or guaranteed under title IV of the Higher
21 Education Act of 1965 (20 U.S.C. 1070 et seq.);
22 (b) is extended to a consumer expressly, in whole or in part, for
23 higher education expenses, regardless of whether the loan is provided by
24 the educational institution that the student attends;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01638-01-3
A. 3155 2
1 (c) does not include open-end credit or any loan that is secured by
2 real property or a dwelling; and
3 (d) does not include an extension of credit in which the covered
4 educational institution is the creditor if:
5 (i) the term of the extension of credit is ninety days or less; or
6 (ii) an interest rate or finance charge will not be applied to the
7 credit balance and the term of the extension of credit is one year or
8 less, even if the credit is payable in more than four installments.
9 2. "Private education lender", except as exempted under this article,
10 means:
11 (a) any person or entity engaged in the business of securing, making,
12 or extending private education loans; or
13 (b) any holder of a private education loan.
14 3. "Borrower" or "private education loan borrower" means a person who
15 has received or agreed to pay a private education loan for his or her
16 own educational expenses.
17 4. "Cosigner" (a) means:
18 (i) any individual who is liable for the obligation of another without
19 compensation, regardless of how designated in the contract or instrument
20 with respect to that obligation, including an obligation under a private
21 education loan extended to consolidate a borrower's pre-existing private
22 education loans; and
23 (ii) includes any person the signature of which is requested as condi-
24 tion to grant credit or to forbear on collection;
25 (b) does not include a spouse of an individual described in subpara-
26 graph (i) of paragraph (a) of this subdivision, the signature of whom is
27 needed to perfect the security interest in a loan.
28 5. "Original creditor" means the private education lender identified
29 in a promissory note, loan agreement, or loan contract entered into with
30 a private education loan borrower or cosigner.
31 6. "Creditor" means:
32 (a) the original creditor, where ownership of a private education loan
33 debt has not been sold, assigned, or transferred;
34 (b) the person or entity that owned the private education loan debt at
35 the time the debt became delinquent or defaulted, even if that person or
36 entity did not originate the private education loan, and where such a
37 debt has not subsequently been sold, transferred or assigned; or
38 (c) a person or entity that purchased a delinquent or defaulted
39 private education loan debt for collection purposes, whether it collects
40 the debt itself, hires a third party for collection, or hires an attor-
41 ney for collection litigation.
42 7. "Debt collector" means any person who regularly collects or
43 attempts to collect, directly or indirectly, consumer debts originally
44 owed or due or asserted to be owed or due another. The term does not
45 include any officer or employee of a creditor who, in the name of the
46 creditor, collects debts for such creditor, but it does include any
47 creditor who, in the process of collecting its own debts, uses any name
48 other than its own which would indicate that a third person is collect-
49 ing or attempting to collect such debts.
50 8. "Higher education expense" means any expense arising from higher
51 education, as defined in section two of the education law, regardless of
52 whether the higher education institution is accredited within New York
53 state.
54 § 1101. Applicability. 1. Any person or entity that enters into a
55 contract or subcontract with a private education lender or servicer to
A. 3155 3
1 perform the servicing of a private education loan must fulfill the obli-
2 gations of the private education lender under this article.
3 2. Any private education lender as described in subdivision two of
4 section eleven hundred of this article be jointly and severally liable
5 for the actions of the entity or person in fulfilling the obligations of
6 the private educational lender or servicer under this article.
7 § 1102. Exempt organizations. The following shall be exempt from the
8 provisions of this article only to the extent that state regulation is
9 preempted by federal law:
10 1. Any banking organization, foreign banking corporation, national
11 bank, federal savings association, federal credit union, or any bank,
12 trust company, savings bank, savings and loan association, or credit
13 union organized under the laws of any other state; and
14 2. Any subsidiary of such entities set forth in subdivision one of
15 this section.
16 § 1103. Provisions applicable to cosigners. 1. (a) Prior to the origi-
17 nation of a private education loan, the private education lender shall
18 provide to all cosigner applicants information about the rights and
19 responsibilities of the cosigner of the loan, including:
20 (i) information about how the private education lender will furnish
21 information about the cosigner's private education loan obligation to
22 credit reporting agencies;
23 (ii) information about how the cosigner will be notified if the
24 private education loan becomes delinquent, including how the cosigner
25 can cure the delinquency in order to avoid negative credit furnishing
26 and loss of cosigner release eligibility; and
27 (iii) information about eligibility for release of the cosigner's
28 obligation on the private education loan, including number of on-time
29 payments and any other criteria required to approve the release of
30 cosigner from the loan obligation.
31 (b) Lenders shall send borrowers and cosigners annual written notices
32 containing information about cosigner release, including criteria the
33 lender requires to approve the release of cosigner from the loan obli-
34 gation and the process for applying for cosigner release.
35 (c) Once the borrower has met the applicable consecutive on-time
36 payment requirement to be eligible for cosigner release, the lender
37 shall send the borrower and cosigner a written notification by U.S. mail
38 and by electronic mail, where a borrower has elected to receive elec-
39 tronic communications from the lender, informing the borrower and cosig-
40 ner that he or she has met the applicable consecutive, on-time payments
41 requirement to be eligible for cosigner release. The notification shall
42 also include information about any additional criteria to qualify for
43 cosigner release, and the procedure to apply for cosigner release.
44 (d) Lenders shall provide written notice within fifteen days to any
45 borrower who applies for cosigner release, but whose application is
46 incomplete. The written notice must include a description of the infor-
47 mation needed to consider the application complete and the date by which
48 the applicant should furnish the missing information.
49 (e) After a borrower submits a complete application for cosigner
50 release, within thirty days, the lender shall send the borrower and
51 cosigner a written notice that informs the borrower and cosigner whether
52 the cosigner release application has been approved or denied. If the
53 lender denies a request for cosigner release, the lender shall inform
54 the borrower of his or her right to request all documents and informa-
55 tion used in the determination, including the credit score threshold
56 used by the lender, the borrower's consumer report, the borrower's cred-
A. 3155 4
1 it score, and any other documents specific to the borrower. The lender
2 must also provide any adverse action notices required under applicable
3 federal law if the denial is based in whole or in part on any informa-
4 tion contained in a consumer report.
5 2. (a) In response to any written or oral request for cosigner
6 release, lenders shall send the information described in paragraph (b)
7 of subdivision one of this section.
8 (b) Lenders shall not impose any restrictions that may permanently bar
9 a borrower from qualifying for cosigner release, including restricting
10 the number of times a borrower may apply for cosigner release.
11 (c) Lenders shall not impose any negative consequences on any borrower
12 or cosigner during the sixty days following the issuance of the notice
13 required under paragraph (d) of subdivision one of this section, or
14 until the lender makes a final determination about a borrower's cosigner
15 release application. For the purpose of this paragraph, "negative conse-
16 quences" includes, but is not limited to, the imposition of additional
17 eligibility criteria, negative credit reporting, lost eligibility for
18 cosigner release, late fees, interest capitalization, or other financial
19 injury.
20 (d) Lenders shall not require greater than twelve consecutive, on-time
21 payments as criteria to apply for cosigner release. Any borrower who has
22 paid the equivalent of twelve months of principal and interest payments
23 within any twelve-month period will be considered to have satisfied the
24 consecutive, on-time payment requirement, even if the borrower has not
25 made payments monthly during the twelve-month period.
26 (e) If a borrower or cosigner requests a change that restarts the
27 count of consecutive, on-time payments required for cosigner release,
28 the lender shall notify the borrower and cosigner in writing within ten
29 days of the impact of such an arrangement and provide the borrower or
30 cosigner the right to withdraw or reverse the request to avoid such
31 impact.
32 (f) The borrower has the right to request an appeal of a lender's
33 determination to deny the cosigner release application within ninety
34 days of receiving the lender's determination, and the lender shall
35 permit such borrower to submit additional documentation evidencing that
36 the borrower has the ability, willingness, and stability to handle his
37 or her payment obligations. The borrower may request review of the
38 cosigner release determination by another employee. The lender shall
39 inform the borrower of this right in a clear and conspicuous manner on
40 the notice denying the cosigner release application.
41 (g) A lender must establish and maintain a comprehensive record
42 management system reasonably designed to ensure the accuracy, integrity,
43 and completeness of data and other information about cosigner release
44 applications. This system shall include the number of cosigner release
45 applications received, the approval and denial rate, and the primary
46 reasons for any denial.
47 (h) If a cosigner has a total and permanent disability, as determined
48 by any federal agency, state agency, or physician or doctor of osteopa-
49 thy legally authorized to practice in the state in which the cosigner
50 resides, the lender shall release the cosigner from the cosigner's obli-
51 gation to repay the loan upon receiving a notification of the cosigner's
52 total and permanent disability. The lender shall not require a new
53 cosigner to be added to the loan after the original cosigner has been
54 released from the loan.
A. 3155 5
1 3. (a) A lender shall provide a cosigner of a private education loan
2 with access to all documents or records related to the cosigned private
3 education loan that are available to the borrower;
4 (b) If a lender provides electronic access to documents and records
5 for a borrower, it shall provide equivalent electronic access to the
6 cosigner; and
7 (c) Upon receiving notice from the borrower or cosigner, the lender
8 shall redact the contact information of the other party.
9 § 1104. Prohibition on acceleration of payments on private education
10 loans. 1. Except as provided in subdivision two of this section, a
11 private education loan executed after the effective date of this article
12 may not include a provision that permits the private educational lender
13 to accelerate, in whole or in part, payments on the private education
14 loan.
15 2. A private education loan may include a provision that permits
16 acceleration of the loan in cases of payment default.
17 3. A lender shall not place any loan or account into default or accel-
18 erate a loan for any reason, other than for failure to pay.
19 4. (a) In the event of the death of a cosigner, a lender shall not
20 attempt to collect against the cosigner's estate, other than for failure
21 to pay.
22 (b) Upon receiving notification of the death or bankruptcy of a cosig-
23 ner, when the loan is not more than sixty days delinquent at the time of
24 the notification, a lender shall not change any terms or benefits under
25 the promissory note, repayment schedule, repayment terms, or monthly
26 payment amount or any other provision associated with the loan.
27 (c) A lender shall not place any loan or account into default or
28 accelerate a loan for any reason, other than for failure to pay.
29 § 1105. Required communications from creditors and debt collectors.
30 In addition to any other information required under applicable federal
31 or state law, a creditor or debt collector shall provide, in writing, in
32 the first debt collection communication with the private education loan
33 borrower or cosigner, or within five days thereafter, and at any other
34 time the borrower or cosigner requests such documentation:
35 1. The name of the current owner of the private education loan debt;
36 2. The original creditor's name at the time of origination and, if
37 different, at the time of sale of the loan, if applicable;
38 3. The original creditor's account number used to identify the private
39 education loan debt at the time of sale, if applicable;
40 4. The total outstanding amount owed at the time of default or the
41 amount due to bring the loan current if the loan is delinquent, but not
42 yet in default;
43 5. A schedule of all transactions credited or debited to the private
44 education loan account;
45 6. A copy of all pages of the contract, application or other documents
46 stating all terms and conditions applicable to the private education
47 loan and evidencing the private education loan borrower's or cosigner's
48 liability for the private education loan; and
49 7. A clear and conspicuous statement disclosing that the borrower or
50 cosigner has a right to request all information possessed by the credi-
51 tor related to the private education loan debt, including, but not
52 limited to the information included in section eleven hundred six of
53 this article.
54 § 1106. Required information to be provided by creditors and debt
55 collectors. 1. A creditor or debt collector may not collect or attempt
A. 3155 6
1 to collect a private education loan debt unless the creditor or debt
2 collector possesses the following:
3 (a) The name of the owner of the private education loan;
4 (b) The original creditor's name at the time of sale of the loan or
5 default, if applicable;
6 (c) The original creditor's account number used to identify the
7 private education loan at the time of sale or default, if the original
8 creditor used an account number to identify the private education loan
9 at the time of sale or default;
10 (d) The amount due at the time of sale, or at default, or, if the loan
11 is delinquent, to bring the loan current;
12 (e) A schedule of all transactions credited or debited to the private
13 education loan account;
14 (f) An itemization of interest and fees, if any, claimed to be owed
15 and whether those were imposed by the original creditor or any subse-
16 quent owners of the private education loan;
17 (g) The date that the private education loan was incurred;
18 (h) A billing statement or other account record indicating the date of
19 the first partial payment and/or the first day that a payment was
20 missed, whichever is earlier;
21 (i) A billing statement or other account record indicating the date of
22 the last payment made by the borrower or cosigner, if applicable;
23 (j) Any payments, settlement, or financial remuneration of any kind
24 paid to the creditor by a guarantor, cosigner, or surety, and the amount
25 of payment received;
26 (k) A copy of the self-certification form and any other "needs analy-
27 sis" conducted by the original creditor prior to origination of the
28 loan;
29 (l) A log of all collection attempts made in the previous twelve
30 months including date and time of all calls and written communications;
31 (m) Copies of all written settlement offers sent in the last twelve
32 months, or, in the alternative, a statement that the creditor has not
33 attempted to settle or otherwise renegotiate the debt prior to suit;
34 (n) Copies of all collection letters sent to the borrower and cosigner
35 since inception of the loan;
36 (o) Documentation establishing that the creditor is the owner of the
37 specific individual private education loan at issue. If the private
38 education loan was assigned more than once, the creditor must possess
39 each assignment or other writing evidencing the transfer of ownership of
40 the specific individual private education loan to establish an unbroken
41 chain of ownership, beginning with the original creditor to the first
42 subsequent creditor and each additional creditor. Each assignment or
43 other writing evidencing transfer of ownership or the right to collect
44 must contain the original creditor's account number (redacted for secu-
45 rity purposes to show only the last four digits) of the private educa-
46 tion loan purchased or otherwise assigned, the date of purchase and
47 assignment, and must clearly show the borrower's, and if applicable,
48 cosigner's correct name associated with the original account number. The
49 assignment or other writing attached shall be that by which the creditor
50 or other assignee acquired the private education loan, not a document
51 prepared for litigation or collection purposes;
52 (p) A copy of all pages of the contract, application or other docu-
53 ments evidencing the private education loan borrower's, and if applica-
54 ble, cosigner's liability for the private education loan, stating all
55 terms and conditions applicable to the private education loan; and
A. 3155 7
1 (q) A signed affidavit or affidavits from each of the previous owners
2 of the private education loan regarding when the previous owner acceler-
3 ated the loan from delinquency status to default status, or if applica-
4 ble, a statement that no such acceleration occurred.
5 2. Upon written or oral request from a borrower or cosigner for any
6 information that a creditor or debt collector is required to possess
7 pursuant to subdivision one of this section, a creditor or debt collec-
8 tor shall send the requested information to the borrower or cosigner
9 within fifteen days of receipt of the request.
10 § 1107. Enforcement. 1. All private education lenders, creditors and
11 debt collectors shall comply with the provisions of this article.
12 2. Any borrower or cosigner who suffers damage as a result of the
13 failure of a private education lender, creditor, or debt collector
14 covered by the provision of this article may bring an action on their
15 own behalf and on behalf of a similarly situated class of consumers
16 against that person to recover or obtain any of the following:
17 (a) actual damages, but in no case shall the total award of damages be
18 less than five hundred dollars per person, per violation of this section
19 or of section three thousand twelve-c of the civil practice law and
20 rules;
21 (b) punitive damages;
22 (c) correction of any inaccurate, negative reporting by the lender,
23 creditor, or debt collector to any credit reporting agency;
24 (d) injunctive relief; and
25 (e) any other relief that the court deems proper.
26 3. If a creditor or debt collector fails to comply with subdivision
27 (e) of section three thousand twelve-c of the civil practice law and
28 rules, the borrower or the cosigner who sent the written notice therein
29 may bring an action on his or her own behalf or on behalf of a similarly
30 situated class of persons against the creditor or debt collector and may
31 recover or obtain any of the same forms of relief as provided in subdi-
32 vision two of this section, as well as an order setting aside or vacat-
33 ing any judgment entered against the borrower or cosigner. In addition
34 to any other remedies provided by this section or otherwise provided by
35 law, whenever it is proven by a preponderance of the evidence that a
36 creditor, debt collector, or attorney representing a creditor or debt
37 collector filed an affidavit required under section three thousand
38 twelve-c of the civil practice law and rules containing false informa-
39 tion, the court shall award treble actual damages to the borrower or
40 cosigner, but in no case shall the award of damages be less than one
41 thousand five hundred dollars, per person, per violation of that
42 section.
43 4. In the case of any successful action to enforce the foregoing
44 liability, a private education lender, creditor, or debt collector is
45 liable for the costs of the action, together with reasonable attorneys'
46 fees as determined by the court.
47 5. The attorney general or the district attorney of any county may
48 bring an action in the name of the people of the state to restrain or
49 prevent any violation of this article or any continuance of any such
50 violation.
51 6. Nothing in this article shall limit any statutory or common law
52 right of any person to bring any action in any court for any act, or the
53 right of the state to punish any person for any violation of any law.
54 § 1108. Rules and regulations. 1. In addition to such powers as may
55 otherwise be prescribed by this chapter, the superintendent of financial
56 services is hereby authorized and empowered to promulgate such rules and
A. 3155 8
1 regulations as may in the judgment of the superintendent be consistent
2 with the purposes of this article, or appropriate for the effective
3 administration of this article, including, but not limited to:
4 (a) such rules and regulations in connection with the activities of
5 private education lenders, creditors, and debt collectors as may be
6 necessary and appropriate for the protection of borrowers in this state;
7 (b) such rules and regulations as may be necessary and appropriate to
8 define unfair, deceptive or abusive acts or practices in connection with
9 the activities of private education lenders, creditors, and debt collec-
10 tors;
11 (c) such rules and regulations as may define the terms used in this
12 article and as may be necessary and appropriate to interpret and imple-
13 ment the provisions of this article; and
14 (d) such rules and regulations as may be necessary for the enforcement
15 of this article.
16 2. The superintendent is hereby authorized and empowered to make such
17 specific rulings, demands and findings as the superintendent may deem
18 necessary for the proper conduct of the private education loan industry.
19 § 1109. Penalties. In addition to such penalties as may otherwise be
20 applicable by law, including but not limited to the penalties available
21 under section forty-four of the banking law, the superintendent of
22 financial services may, after notice and a hearing, or upon a finding of
23 a violation of this article in a civil action brought by the attorney
24 general, require any person found violating the provisions of this arti-
25 cle or the rules or regulations promulgated hereunder to pay to the
26 people of this state a penalty for each violation of the article or any
27 regulation or policy promulgated hereunder a sum not to exceed the
28 greater of (i) ten thousand dollars for each offense; (ii) a multiple of
29 two times the aggregate damages attributable to the violation; or (iii)
30 a multiple of two times the aggregate economic gain attributable to the
31 violation.
32 § 2. Subdivision (q-1) of section 105 of the civil practice law and
33 rules, as added by chapter 593 of the laws of 2021, is amended to read
34 as follows:
35 (q-1) Original creditor. The term "original creditor" means the entity
36 that owned a consumer credit account at the date of default giving rise
37 to a cause of action, except that if the consumer credit account is a
38 private education loan, as defined in subdivision one of section eleven
39 hundred of the general business law, "original creditor" means the
40 private education lender identified in a promissory note, loan agree-
41 ment, or loan contract entered into with a private education loan
42 borrower or cosigner.
43 § 3. The civil practice law and rules is amended by adding a new
44 section 3012-c to read as follows:
45 § 3012-c. Pleading requirements in private education loan actions. In
46 addition to any other papers and documents required by this chapter, in
47 an action arising out of a private education loan:
48 (a) Accompanying the complaint, one or more sworn affidavits by a
49 representative of the plaintiff or plaintiff's attorney shall be
50 attached to the complaint attesting:
51 (1) that the plaintiff has in its possession the information required
52 in subdivision one of section eleven hundred six of the general business
53 law;
54 (2) that the communication required in section eleven hundred five of
55 the general business law has been complied with;
A. 3155 9
1 (3) as to whether the debt is eligible for an income-based repayment
2 plan free of charge to the borrower or cosigner, equivalent to the
3 repayment arrangement established for federal student loans under Arti-
4 cle IV of the Higher Education Act (20 USC 1078 et. seq.);
5 (4) whether, after reasonable inquiry, the plaintiff or the
6 plaintiff's attorney has reason to believe that the debt is a qualified
7 education loan as defined in 26 U.S.C. § 221; and
8 (5) that the information set forth in paragraph one of this subdivi-
9 sion, the allegations set forth in the complaint and any supporting
10 affidavits or affirmations, as well as the notarizations contained in
11 the supporting documents filed therewith, are accurate.
12 (b) Copies of the documentation identified in paragraphs (o) and (q)
13 of subdivision one of section eleven hundred six of the general business
14 law shall be attached to the complaint. The requirements of this subdi-
15 vision shall satisfy those required for an action arising out of a
16 consumer credit transaction, pursuant to subdivision (f) of section 3215
17 of this chapter, where the plaintiff is not the original creditor, as
18 defined in section 105 of this chapter.
19 (c) An affidavit by the plaintiff or plaintiff's attorney shall accom-
20 pany the complaint, stating that after reasonable inquiry, he or she has
21 reason to believe that the statute of limitations has not expired.
22 Compliance with this subdivision shall satisfy the provisions of
23 subdivision (j) of section 3215 of this chapter for an attorney repres-
24 enting a creditor seeking a judgment by default entered by the clerk in
25 an action arising from a private education loan debt.
26 (d) A judge or clerk shall not grant or enter a judgment pursuant to
27 rule 3212 or sections 3213, 3215 or 3218 of this chapter in an action
28 arising from a private education loan debt that does not comply with the
29 requirements described in subdivisions (a), (b), and (c) of this
30 section.
31 (e) Upon receipt of written notice provided by a borrower or cosigner,
32 or upon notice from the attorney general or superintendent of financial
33 services on behalf of a group of borrowers, to a creditor or debt
34 collector stating that the creditor or debt collector has failed to
35 comply with this section, the creditor or debt collector shall:
36 (i) Provide proof of compliance with the provisions of this section;
37 or
38 (ii) Take the following actions:
39 1. move to vacate the judgment;
40 2. refund all monies paid by the borrower or cosigner after the judg-
41 ment was entered; and
42 3. correct any inaccurate, negative credit information furnished by
43 the creditor or debt collector.
44 (f) The definitions of terms set forth in section eleven hundred of
45 the general business law shall apply to the provisions of this section.
46 § 4. Section 3213 of the civil practice law and rules, as amended by
47 chapter 593 of the laws of 2021, is amended to read as follows:
48 § 3213. Motion for summary judgment in lieu of complaint. When an
49 action is based upon an instrument for the payment of money only or upon
50 any judgment, the plaintiff may serve with the summons a notice of
51 motion for summary judgment and the supporting papers in lieu of a
52 complaint. The summons served with such motion papers shall require the
53 defendant to submit answering papers on the motion within the time
54 provided in the notice of motion. The minimum time such motion shall be
55 noticed to be heard shall be as provided by subdivision (a) of rule 320
56 for making an appearance, depending upon the method of service. If the
A. 3155 10
1 plaintiff sets the hearing date of the motion later than the minimum
2 time therefor, he may require the defendant to serve a copy of his
3 answering papers upon him within such extended period of time, not
4 exceeding ten days, prior to such hearing date. No default judgment may
5 be entered pursuant to subdivision (a) of section 3215 prior to the
6 hearing date of the motion. If the motion is denied, the moving and
7 answering papers shall be deemed the complaint and answer, respectively,
8 unless the court orders otherwise. The additional notice required by
9 subdivision (j) of rule 3212 shall be applicable to a motion made pursu-
10 ant to this section in any action to collect a debt arising out of a
11 consumer credit transaction where a consumer is a defendant. The addi-
12 tional pleading required by section 3012-c shall be applicable to a
13 motion made pursuant to this section in any action to collect a debt
14 arising out of a private education loan, as defined in section eleven
15 hundred of the general business law.
16 § 5. Severability. If any clause, sentence, paragraph, subdivision,
17 section or part of this act shall be adjudged by any court of competent
18 jurisdiction to be invalid, such judgment shall not affect, impair, or
19 invalidate the remainder thereof, but shall be confined in its operation
20 to the clause, sentence, paragraph, subdivision, section or part thereof
21 directly involved in the controversy in which such judgment shall have
22 been rendered. It is hereby declared to be the intent of the legislature
23 that this act would have been enacted even if such invalid provisions
24 had not been included herein.
25 § 6. This act shall take effect on the sixtieth day after it shall
26 have become a law.
