Directs the superintendent of financial services to create a private education debt registry which shall contain information and documentation relating to loans issued by creditors including interest rates and copies of the notes and instruments used by such creditors for education loans.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A8913
SPONSOR: Epstein
 
TITLE OF BILL:
An act to amend the financial services law, in relation to creating a
private education debt registry
 
PURPOSE GENERAL IDEA OF BILL:
The purpose of the bill is to give financial policymakers and consumers
a full and accurate view of the state of student debt in New York
through the creation of a private education debt registry.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill amends the financial services law by adding a new
Article 9 to create the "private education debt registry." This article
requires all private education creditors operating in New York State
that are not already licensed or chartered by the Department of Finan-
cial Services (DFS) for their private education debt business to regis-
ter with the DFS, and requires all private education creditors to annu-
ally submit information on their private education debt activity,
regardless of debt's principal amount or interest rate. Private educa-
tion creditors are defined as including any person that originates
student loan debt or to which such a debt is owed, as well as to include
non-loan debt.
The annual information that private education creditor's must disclose
to DFS varies based on the type of creditor and includes: a list of
schools at which the private education creditor has provided a private
education debt to a consumer residing in the state, the total dollar
amount and number of private education debt made, both overall and
during the prior fiscal year, to consumers residing in the state and
made annually at each school, the range of interest rates and percentage
of applicants who receive those rates, the general default rate, the
default rate due to non-payment or due to other reasons, the total
dollar amount and number of private education debts made annually with a
cosigner, the total dollar amount and number of private education debts
that were used to refinance other private education debts, the total
dollar amount and number of private education debts for which the credi-
tor sued to collect, and a copy of the promissory notes and other agree-
ments used to issue private education debts. The bill provides for modi-
fied reporting requirements relating to private education debts that do
not arise from credit transactions. DFS must publish a summary of the
information received from private education creditors on their website
along with the name, address, telephone number and website for all
private education creditors.
DFS is authorized to promulgate rules and regulations. A violation of
this article done knowingly may result in a civil penalty up to $10,000
for each violation or being barred from acting as a private education
creditor for up to ten years.
Section 2 of the bill contains the effective date.
 
JUSTIFICATION:
In New York, consumer lenders are not required to be licensed unless the
loan is both smaller than $25,000 and at a rate above 16 percent.' Even
subprime loans generally have interest rates below 16 percent. As a
result, private education creditors who do not meet licensing require-
ments operate below the Department of Financial Services' radar. This
makes information related to private education debts originated to New
Yorker borrowers at rates below 16 percent scarce. Additionally, private
education creditors that are regulated by DFS are not required to
specifically report on their education debt portfolios. Further, there
is increasing national scrutiny of school-based debt collection and the
role of institutions of higher education as creditors. The federal
Consumer Financial Protection Bureau began to examine school-based lend-
ing in 2022, and determined that transcript withholding as a means of
collecting these debts is "abusive" in violation of federal consumer
protection law. New York State in 2022 prohibited the practice of tran-
script withholding at all schools in the state, which serves as a debt
collection tactic for school-based education debt, but has not taken any
additional steps to study or regulate these debts themselves.
Whereas federal student loan terms are set by federal law, and whereas
data about the federal student loan market are regularly published by
the federal government, the lack of consistently available data related
to private education debt and the variety of persons that act as private
education creditors means that we do not know the full size of the
market, trends in origination, terms and conditions of debts, differ-
ences in finance costs across demographic groups, default rates, rates
of cosigning, prevalence of private student debt and repayment outcomes
among older consumers, or outcomes related to student loan servicing.
Any data that are available are extrapolations.
To address this lack of data, Colorado, Maine, California, Louisiana,
Maryland, and Illinois require private education creditors to annually
submit data to financial regulators. New York should do the same.
This bill does not require any changes to the business practices of
private education creditors, other than require them to share data with
the State.
Concerns that this measure of transparency is too burdensome for the
state to implement or would yield little value are misplaced. States
that have already implemented similar registries have done so at reason-
able cost and using existing data systems. New York regularly regulates,
or seeks to regulate, complex financial services sectors with more
diverse participants than the education creditors covered by this bill
and has demonstrated its ability to implement a registry like the one
described herein. Further, the bill would cover and require reporting
from all private education creditors operating in the state for which
federal law does not preempt such reporting. Experts estimate that the
bill would apply to as much as ninety (90) percent of private education
finance origination and would therefore give New York the most compre-
hensive understanding of its education credit market of any state in the
country. It is in New Yorkers' best interest for this bill to be
adopted.
 
PRIOR LEGISLATIVE HISTORY:
2023: S.5056 (Thomas) / A.5266 -A (Epstein): Veto Memo 137
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
 
EFFECTIVE DATE:
This act shall take effect.
1 New York Bank Law 340
STATE OF NEW YORK
________________________________________________________________________
8913
IN ASSEMBLY
January 26, 2024
___________
Introduced by M. of A. EPSTEIN, BURDICK, WOERNER, DE LOS SANTOS, REYES
-- read once and referred to the Committee on Banks
AN ACT to amend the financial services law, in relation to creating a
private education debt registry
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The financial services law is amended by adding a new arti-
2 cle 9 to read as follows:
3 ARTICLE 9
4 PRIVATE EDUCATION DEBT REGISTRY
5 Section 901. Definitions.
6 902. Private education debt registry.
7 903. Rules and regulations.
8 904. Violations.
9 905. Severability.
10 § 901. Definitions. As used in this article:
11 1. "Fiscal year" means the twelve-month period that the private educa-
12 tion creditor uses for financial reporting and budgeting.
13 2. "Higher education" means higher education, including career educa-
14 tion, as those terms are defined in section two of the education law,
15 via correspondence, online, or in person, regardless of whether the
16 higher education institution is accredited within New York state.
17 3. "Higher education expense" means any expense arising from higher
18 education.
19 4. "Private education creditor" means any person engaged in the busi-
20 ness of securing, making, or extending a private education debt, or any
21 holder of a private education debt, including providers of higher educa-
22 tion to which a student education debt is owed. "Private education cred-
23 itor" shall not include the following persons, only to the extent that
24 state regulation is preempted by federal law:
25 (a) any federally chartered bank, savings bank, savings and loan asso-
26 ciation, or credit union;
27 (b) any bank, savings bank, savings and loan association, or credit
28 union organized under the laws of this or any other state;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08128-05-4
A. 8913 2
1 (c) any wholly owned subsidiary of a federally chartered bank or cred-
2 it union; and
3 (d) any operating subsidiary where each owner of the operating subsid-
4 iary is wholly owned by the same federally chartered bank or credit
5 union.
6 5. "Private education debt" means an extension of credit or debt or
7 obligation owed or incurred by a consumer, contractual or otherwise,
8 contingent or absolute, that meets all of the following criteria:
9 (a) is not made, insured, or guaranteed under Title IV of the Higher
10 Education Act of 1965 (20 U.S.C. s.1070 et seq.);
11 (b) is extended to a consumer expressly, in whole or in part, for, or
12 accrues from nonpayment of, higher education expenses, regardless of
13 whether the credit or debt or obligation is owed to the provider of
14 higher education that the student attends; and
15 (c) shall not include any loan that is secured by real property or a
16 dwelling.
17 "Private education debt" shall include extensions of credit or debt or
18 obligations owed or incurred to refinance a private education debt.
19 6. "Provider of higher education" or "school" means a person engaged
20 in the business of higher education. For the purposes of this defi-
21 nition, a person need not have obtained authorization from the depart-
22 ment of education to operate in this state and need not be an accredited
23 institution.
24 § 902. Private education debt registry. 1. Beginning on or after the
25 one hundred eightieth day after the effective date of this article, no
26 person shall engage in business as a private education creditor in this
27 state without first satisfying the following requirements set forth in
28 subdivisions two and three of this section.
29 2. (a) A private education creditor operating in this state shall
30 register with the superintendent pursuant to any registration procedures
31 set forth by the superintendent by rule or regulation, which may include
32 registration through the Nationwide Multistate Licensing System and
33 Registry, and shall pay a fee set by the superintendent. The superinten-
34 dent may prescribe an alternative registration process and fee structure
35 for a provider of higher education. Registration shall include, at a
36 minimum, the name and address of the private education creditor and any
37 officer, director, partner, or owner of a controlling interest of the
38 private education creditor. A private education creditor shall annually
39 renew its registration and pay a renewal fee pursuant to a procedure and
40 on or before a date to be determined by the superintendent.
41 (b) This subdivision shall not apply to regulated persons, as such
42 term is defined in section one hundred four of this chapter, engaged in
43 business as a private education creditor in this state, to the extent
44 such regulation relates to its business as a private education creditor
45 and such persons are required to furnish data or reports annually to the
46 superintendent.
47 3. A private education creditor operating in this state shall annual-
48 ly, on or before a date to be determined by the superintendent and not
49 to exceed six months following the effective date of this article,
50 provide the superintendent with the following documents and information
51 about such creditor's private education debt portfolio related to
52 consumers that reside in this state pursuant to any procedure set forth
53 by the superintendent, which may include reporting through the Nation-
54 wide Multistate Licensing System and Registry, and which may further
55 include different procedures for regulated persons, as that term is
A. 8913 3
1 defined in section one hundred four of this chapter, and non-regulated
2 persons:
3 (a) For private education creditors that secure, make, or extend
4 private education debts, other than those private education debts
5 reported pursuant to paragraph (c) of this subdivision, relating to such
6 debts owed by a consumer residing in this state as of the end of the
7 prior fiscal year:
8 (i) a list of all schools for which such private education debts were
9 used to finance higher education, including, in the case of a refinanc-
10 ing loan, the school that the consumer attended using the private educa-
11 tion debt that was refinanced;
12 (ii) the total outstanding dollar amount and number of such private
13 education debts and the number of consumers who owe such private educa-
14 tion debts;
15 (iii) the total dollar amount and number of such private education
16 debts associated with each school identified under subparagraph (i) of
17 this paragraph;
18 (iv) the total dollar amount and number of private education debts
19 secured, made, or extended in the prior fiscal year;
20 (v) the total dollar amount and number of private education debts
21 secured, made, or extended in the prior fiscal year associated with each
22 school identified under subparagraph (i) of this paragraph;
23 (vi) the range of starting interest rates for private education debts
24 secured, made, or extended to consumers in the prior fiscal year and
25 percentage of consumers who receive those rates;
26 (vii) the overall default rate, as well as the overall default for
27 such debts associated with each school listed under subparagraph (i)
28 of this paragraph;
29 (viii) the total dollar amount and number of private education debts
30 that defaulted for reasons other than non-payment in the prior fiscal
31 year, as applicable;
32 (ix) the total dollar amount and number of private education debts
33 with a cosigner, as applicable;
34 (x) the total dollar amount and number of private education debts
35 secured, made, or extended with a cosigner in the prior fiscal year, as
36 applicable;
37 (xi) the total dollar amount and number of private education debts
38 secured, made, or extended to refinance other private education debts or
39 federal student loans, respectively, as applicable;
40 (xii) the total dollar amount and number of private education debts
41 secured, made, or extended to refinance other private education debts or
42 federal student loans, respectively, in the prior fiscal year, as appli-
43 cable;
44 (xiii) the total dollar amount and number of private education debts
45 for which the private education creditor has sued to collect in the
46 prior fiscal year, as applicable;
47 (xiv) additional information as may in the judgment of the superinten-
48 dent be necessary and appropriate in order to assess the total size and
49 status of the private education debt market and to assess borrower well-
50 being; and
51 (xv) A copy of any model promissory note, agreement, contract or other
52 instrument used by a private education creditor during the previous
53 fiscal year to substantiate that a new private education debt has been
54 extended to the consumer or that a consumer owes a debt or obligation to
55 the private education creditor.
A. 8913 4
1 (b) For private education creditors that acquire or assume private
2 education debts owed by a consumer residing in this state, relating to
3 such debts as of the end of the prior fiscal year:
4 (i) a list of all schools for which such private education debts were
5 used to finance higher education, including, in the case of a refinanc-
6 ing loan, the school that the consumer attended using the private educa-
7 tion debt that was refinanced;
8 (ii) the total outstanding dollar amount and number of such private
9 education debts and number of consumers who owe such private education
10 debts;
11 (iii) the total dollar amount and number of private education debts
12 associated with each school identified under subparagraph (i) of this
13 paragraph;
14 (iv) the total dollar amount and number of private education debts
15 acquired or assumed in the prior fiscal year;
16 (v) the total dollar amount and number of private education debts
17 acquired or assumed in the prior fiscal year associated with each school
18 identified under subparagraph (i) of this paragraph;
19 (vi) the overall default rate, as well as the overall default for such
20 debts associated with each school listed under subparagraph (i) of this
21 paragraph;
22 (vii) the total dollar amount and number of private education debts
23 that defaulted for reasons other than nonpayment in the prior fiscal
24 year, as applicable;
25 (viii) the total dollar amount and number of private education debts
26 with a cosigner, as applicable;
27 (ix) the total dollar amount and number of private education debts
28 that were used to refinance other private education debts, as applica-
29 ble;
30 (x) the total dollar amount and number of private education debts for
31 which the private education creditor has sued to collect in the prior
32 fiscal year, as applicable; and
33 (xi) additional information as may in the judgment of the superinten-
34 dent be necessary and appropriate in order to assess the total size and
35 status of the private education debt market and to assess borrower well-
36 being.
37 (c) For private education creditors that are providers of higher
38 education and whose private education debts result from unpaid debts or
39 obligations that were not extensions of credit and that result from
40 higher education provided in this state, relating to such debts as of
41 the end of the prior fiscal year, reported by race and gender:
42 (i) the total outstanding dollar amount and number of private educa-
43 tion debts and number of consumers who owe those debts;
44 (ii) the total dollar amount and number of private education debts
45 accrued and number of consumers who owe those debts in the prior fiscal
46 year;
47 (iii) the total number and balance of student accounts with an academ-
48 ic or administrative hold resulting from a private education debt;
49 (iv) the total number and balance of student accounts with an academic
50 or administrative hold resulting from a private education debt for which
51 a payment was made in the prior fiscal year and average payment made;
52 (v) the total number of student accounts for which federal financial
53 aid was returned to the federal government upon the student's withdrawal
54 from the provider of higher education in the prior fiscal year, and the
55 total dollar amount of any private education debt accrued as a result;
A. 8913 5
1 (vi) the number of consumers who owe a private education debt who
2 received a federal pell grant and the average debt owed;
3 (vii) the number of consumers who owe a private education debt who are
4 considered in-state and out-of-state students, and the total debt owed
5 by each group;
6 (viii) the total dollar amount, number of private education debts, and
7 number of consumers for which the private education creditor has in the
8 prior fiscal year (A) charged off the debt, (B) sent the debt to a third
9 party collection agency, (C) initiated a collection lawsuit, (D)
10 reported the debt to a consumer credit reporting agency, and (E) sold
11 the debt;
12 (ix) the total dollar amount, number of private education debts, and
13 number of consumers for which the private education creditor has, in the
14 prior fiscal year, collected on a private education debt in the follow-
15 ing instances: (A) payment arrangements wherein the payment was not
16 considered past due, such as tuition installment agreements; (B)
17 payments made on past due debts during the same academic term or billing
18 cycle in which the debt accrued and before such debts were sent to a
19 collection agency; (C) payments made on past due debts before they were
20 sent to a collection agency, excluding those payments made during the
21 same academic term or billing cycle in which the debt accrued; (D) a
22 third party collection agency, prior to initiating a lawsuit; and (E) a
23 collection lawsuit, including payments made by settlement or pursuant to
24 a judgment;
25 (x) additional information as may in the judgment of the superinten-
26 dent be necessary and appropriate in order to assess the total size and
27 status of the private education debt market and to assess borrower well-
28 being; and
29 (xi) a copy of any model written instrument used by a provider of
30 higher education in the prior fiscal year to substantiate a private
31 education debt, including but not limited to a promissory note, enroll-
32 ment agreement, or contract.
33 4. Not later than one year following the effective date of this
34 section, the superintendent shall create a publicly accessible website
35 that includes at least the following information about private education
36 creditors registered in this state:
37 (a) The name, address, telephone number and website for all private
38 education creditors;
39 (b) A summary of the information required by subdivision three of this
40 section; and
41 (c) Copies of all documents provided under subparagraph (xv) of para-
42 graph (a) of subdivision three of this section and subparagraph (xi) of
43 paragraph (c) of subdivision three of this section.
44 § 903. Rules and regulations. In addition to such powers as may other-
45 wise be prescribed by this chapter, the superintendent is hereby author-
46 ized and empowered to promulgate such rules and regulations as may in
47 the judgment of the superintendent be consistent with the purposes of
48 this article, or appropriate for the effective administration of this
49 article.
50 § 904. Violations. 1. If the superintendent finds, after notice and
51 hearing, that a private education creditor has knowingly violated this
52 article by failing to comply with any registration or reporting require-
53 ment or by furnishing inaccurate information to the superintendent, the
54 superintendent may impose a civil penalty of not more than ten thousand
55 dollars for each violation.
A. 8913 6
1 2. The superintendent may order that any person who has been found to
2 have knowingly violated any provision of this article, or of the rules
3 and regulations issued pursuant thereto, and has thereby caused finan-
4 cial harm to consumers, be barred for a term not exceeding ten years
5 from acting as a private education creditor, or a stockholder, or an
6 officer, director, partner or other owner, or an employee of a private
7 education creditor.
8 § 905. Severability. If any provision of this article or the applica-
9 tion thereof to any person or circumstance is adjudged invalid by a
10 court of competent jurisdiction, that judgment shall not affect or
11 impair the validity of the other provisions of this article or the
12 application thereof to other persons and circumstances.
13 § 2. This act shall take effect immediately.