Title 808 | Chapter 016 | Regulation 020
SUPERSEDED
This document is no longer current.
PUBLIC PROTECTION CABINET
Kentucky Department of Financial Institutions
Student Education Loan Servicers
(New Administrative Regulation)
808 KAR 16:020.Recordkeeping requirements; unfair, deceptive, or predatory practices.
Section 1.
Definitions.(1)
"Best financial interest of the borrower" means reducing the total cost of a student loan, including principal balance, interest, and fees to the borrower.(2)
"Commissioner" is defined by KRS 286.1-010(1).(3)
"Necessary information" includes the following:(a)
A schedule for all transactions credited or debited to the student loan account;(b)
A copy of the promissory note for the student loan;(c)
Notes created by a student loan servicer's personnel reflecting communication with the borrower regarding the student loan account;(d)
A report of the data fields relating to the borrower's student loan account created by the student loan servicer's electronic systems in connection with servicing practices;(e)
Copies of electronic records or any information or documents provided by the borrower to the student loan servicer;(f)
Usable data fields with information necessary to assess qualification for forgiveness, including public service loan forgiveness, if applicable; and(g)
Any information necessary to compile payment history.(4)
"Negative financial consequences" includes:(a)
Negative credit reporting;(b)
Loss or denial of eligibility for a borrower benefit or protection established under federal law or by contract; and(c)
Late fees, interest capitalization, and other financial injury.(5)
"Qualified request" means a request made by a borrower to a student loan servicer in which the borrower either:(a)
Requests specific information from the student loan servicer; or(b)
Reports what the borrower believes to be an error regarding the borrower's account.(6)
"Student loan servicer" and "servicer" are defined by KRS 286.12-010(13).Section 2.
A student loan servicer shall:(1)
Process student loan payments pursuant to the servicer's established payment processing policies, which shall be disclosed and readily accessible to borrowers;(2)
Credit student loan payments to the borrower's account in accordance with the following:(a)
A payment received before 11:59 p.m. on the date on which that payment is due, in the amount, manner, and location indicated by the servicer, shall be credited as effective on the date on which the payment was received by the servicer. A servicer shall treat a payment received from the borrower on the borrower's due date as an on-time payment;(b)
If a payment is made by check, a servicer shall credit the payment on the date the check was received by the servicer regardless of the date of processing;(c)
If the servicer receives a check with no identifying account information, the servicer shall:1.
Within ten (10) days, determine to which account and loan the payment should be credited and credit the payment as of the date it was received by the servicer; and2.
Update the borrower's online account within one (1) business day of the determination made under (a) of this subparagraph;(d)
If the borrower submits an overpayment to the student loan servicer, the servicer shall inquire of a borrower, either through electronic communication or in writing, to which account the borrower prefers to apply an overpayment. A borrower's direction regarding application of an overpayment to a student loan account shall be effective with respect to future overpayments during the term of a student loan, until the borrower provides to the servicer written alternative instructions regarding overpayment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate an overpayment in a manner consistent with the best financial interest of the borrower; and(e)
If the borrower submits a partial payment, except as otherwise provided by a student loan agreement, comply with the direction provided by a borrower, regarding which account to allocate a partial payment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate a partial payment in a manner consistent with the best financial interest of the borrower;(3)
Not assess negative financial consequences related to the material change by a servicer of the mailing address, office, or procedures for handling borrower payments causing a delay in the crediting of a borrower payment;(4)
Supervise and monitor actions of service providers, including maintaining policies and procedures to oversee compliance by third-party service providers engaged in all aspects of student loan servicing;(5)
Manage and process loan accounts and paperwork, consistent with existing federal requirements, and maintain records ensuring the servicer's personnel have received the following:(a)
Training on the management and processing of accounts and corresponding paperwork; and(b)
Access to necessary account information regarding forms and applications that have been approved, denied, or are in process, applications for income-driven repayment plans, and all forms required to access benefits and protections for federal student loans, pursuant to 20 U.S.C. secs. 1070 et seq., as amended;(6)
Unless a longer period of time is stipulated by a student loan agreement or by federal law, maintain all records regarding a borrower's account for the period of time during which a servicer performs student loan servicing and for a minimum of three (3) years after the loan serviced has been paid in full or assigned to collections, or the servicing rights have been transferred;(7)
Institute and maintain policies and procedures permitting a borrower who is dissatisfied with the outcome of an initial qualified request to escalate the borrower's concern to a supervisor or higher level of review;(8)
Not take actions resulting in negative financial consequences that are directly related to the issue identified in a borrower's qualified request, until that request has been resolved;(9)
Not take actions resulting in negative financial consequences that are directly related to a sale, assignment, transfer, system conversion, or payment made by the borrower to the original student loan servicer consistent with the original student loan servicer's policy;(10)
If a sale, assignment, or other transfer of the servicing of a student loan, results in a change in the identity of the party to whom the borrower is required to send payments or direct any communications concerning the student loan account, notify the borrower, in writing, fifteen (15) days prior to the date the borrower's payment is due on the student loan account, of the following:(a)
If applicable, the license number issued by the commissioner of the new student loan servicer;(b)
The name and address of the new student loan servicer to whom subsequent payments or communications are to be sent;(c)
The telephone numbers and the Web sites of the new student loan servicer;(d)
The effective date of the sale, assignment, or transfer;(e)
The date on which the current student loan servicer will stop accepting payments on the borrower's student loan account; and(f)
The date on which the new student loan servicer will begin accepting payments on the borrower's student loan;(11)
Transfer all necessary information regarding a borrower, a borrower's account, and a borrower's complete student loan history to any new student loan servicer within forty-five (45) calendar days of the effective date of the sale, assignment, or transfer;(12)
Provide and maintain a record of specialized training for customer service personnel to inform:(a)
Military borrowers about student loan repayment benefits and protections;(b)
Borrowers working in public service about student loan repayment benefits and protections;(c)
Older borrowers about the risks specifically applicable to older borrowers to ensure that, once identified, older borrowers are informed about student loan repayment benefits and protections, including discharge or loan forgiveness programs for private and federal loans, if applicable; and(d)
Borrowers with disabilities about student loan repayment benefits and protections, including disability discharge programs for private and federal loans;(13)
Respond to a qualified request by:(a)
Acknowledging, in writing or through electronic communication, receipt of the request within ten (10) business days; and(b)
Within thirty (30) business days of receipt of the request, providing information relating to the status of the request and, if applicable, either the action the student loan servicer will take to correct the account or an explanation for a determination that the borrower's account is correct.1.
The thirty (30) day period set out in subsection (13)(b) of this Section may be extended for fifteen (15) days if, before the end of the thirty (30) day period, the servicer notifies the borrower of the extension and the reason for the delay in responding; and2.
A servicer is required to send a borrower up to three subsequent notices stating there will be no response to a qualified request if the borrower has previously submitted the same request and received a complete response, and no new information is submitted in subsequent, duplicative qualified requests;(14)
Respond within ten (10) business days to communications from the Commissioner;(15)
Provide information to borrowers, in writing, about the availability of loan forgiveness programs and income-driven repayment plan opportunities;(16)
Maintain on its website, free of charge, complete information and account records for each borrower, which shall;(a)
Be accessible to the borrower only, through a secure log-in system;(b)
Include a consolidated account report for each borrower, and a loan history for each student loan serviced; and(c)
Be available to borrowers at all times, except for occasional, short periods of time when the student loan servicer's system is not available because the system is undergoing routine maintenance or is blocked for security reasons.1.
The consolidated account report required under this subsection shall include:a.
Borrower name;b.
Number of student loan(s) serviced for each borrower;c.
Loan number, for each student loan;d.
Loan type, i.e., Direct Loan; FFELP Loan; Perkins Loan; or private student loan;e.
Loan disbursement amount and date, for each student loan;f.
Interest rate(s) and maturity date, or number of monthly payments required to repay the loan, for each student loan;g.
Loan balance and status, for each student loan;h.
Cumulative balance owing for each borrower;i.
Whether the borrower has an application pending for, or is repaying under, an alternative repayment plan, and listing the plan chosen by the borrower; andj.
Whether the borrower has an application pending for any loan forgiveness, cancellation, or discharge benefit and current status of the application; and2.
The loan history required under this subsection shall include the following information, including the corresponding dates or data range, for each:a.
disbursements;b.
interest accruals;c.
fees;d.
late charges;e.
any other miscellaneous amounts charged to the borrower;f.
payments received;g.
payments toward loan forgiveness programs; andh.
the borrower's repayment plan;(17)
Upon request by a borrower, within seven (7) days, provide a borrower, free of charge, a complete and accurate payoff statement. The statement shall clearly indicate the date on which it was prepared, the relevant time frame for submission of the payoff amount, and any circumstances which may change the amount required to pay off the loan account. A student education loan servicer is required to provide one (1) payoff statement per quarter, at no charge to the borrower, upon request. Thereafter, the student loan servicer may charge the borrower the actual cost to produce a physical copy of the account record.JUSTIN BURSE, Acting Commissioner
RAY PERRY, Secretary
APPROVED BY AGENCY: January 13, 2023
FILED WITH LRC: January 13, 2023 at 11:50 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on March 28, 2023, at 2:00 p.m., at 500 Mero Street, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing was received by that date, the hearing may be cancelled. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through March 31, 2023. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Catherine Falconer, General Counsel, 500 Mero Street, 2 SW 19, Frankfort, Kentucky 40601, phone 502-782-9052, fax 502-573-8787, email Catherine.Falconer@ky.gov and Marni Gibson, Acting Deputy Commissioner, Dept. of Financial Institutions, 500 Mero Street, 2SW19, Frankfort, Kentucky 40601, phone 502-782-9053, fax 502-573-8787, email Marni.Gibson@ky.gov.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Catherine Falconer
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes standards that a student loan servicer must abide by in order to maintain accurate records and prevent unfair, deceptive, abusive, or predatory practices.
(b) The necessity of this administrative regulation:
KRS 286.12 was a new statute enacted in the 2021-2022 legislative session. These regulations set forth the requirements and procedures for student loans servicers to follow regarding record and account management along with providing guidance to the licensees regarding unfair, deceptive, abusive, and predatory practices.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
KRS 286.12-050 requires specific records be maintained by the servicer along with a three-year record retention of all account records upon closure of the account. These account records include books, records, correspondence, and accounts of the borrower, to be provided to the Department when required or upon examination, to confirm compliance. KRS 286.12-080 sets forth specific prohibitions of deceptive or abusive acts or practices by the licensee. This administrative regulation provides specific guidance as to appropriate and responsible student loan servicer account management and communication with relevant parties.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation will assist the Department to maintain oversight of the student loans servicers industry by requiring licensee to abide by record retention schedules for specific account records and for proper oversight of account management for the benefit and protection of the borrower.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
N/A
(b) The necessity of the amendment to this administrative regulation:
N/A
(c) How the amendment conforms to the content of the authorizing statutes:
N/A
(d) How the amendment will assist in the effective administration of the statutes:
N/A
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
This regulation effects all student loan servicers that have accounts for Kentucky citizens. The exact number of individuals and businesses affected by this regulation will fluctuate depending upon the number and status of the loans in a given year. There are 74 non-exempt entities licensed in NMLS as student education loan servicers that the Department anticipates will be affected by this administrative regulation.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
All industry participants are required to maintain account records to be compliant with statutory requirements. Specifically, Licensees are required to maintain correspondence between servicer and borrower, maintain records related to payments and application of payments to proper accounts and all account related updates and program applications. The Licensee is required to maintain adequate training and to provide servicer personnel with all required information needed to adequately maintain account records to mitigate abuse, misleading information, or predatory account practices as well as provide required services in the best interest of the borrower. Regulated entities will need to implement proper procedures to ensure servicing standards are met and the borrower is provided with relevant information regarding account management while working in the best interests of the borrower.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
Servicers are required to maintain account records; therefore, there should be no additional cost to implement the requirements.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
All participants, servicers, and borrowers will benefit from process efficiencies and timely information exchanges between servicers and borrowers, along with maintaining the borrower on the lowest cost loan basis which will assist in mitigation of misapplied payments, abusive practices, and participation in the least advantageous loan payment programs to the borrower.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
Initially, there is no additional costs to the Department to implement the new regulations. The Department will utilize current staff to process these applications and maintain reviews of submissions through the national database.
(b) On a continuing basis:
On a continuing basis, dedicated staff will be needed to perform our regulatory functions. The subsequent cost to the Department will be a one-time cost for employee equipment of $20,000.00, then approximately $482,000.00 per year for salary, benefits, and travel costs.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
Revenue will be generated through submission of registration, renewal, and other fees to the Department.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No increase in fees or funding will be necessary to implement and enforce this regulation.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This regulation does not establish or effect any fees.
(9) TIERING: Is tiering applied?
Tiering is not applicable to these regulations based on the nature and subject matter contained within. This regulation relates to record keeping and account management.
FISCAL NOTE
(1) What units, parts, or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation?
The Department of Financial Institutions
(2) Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation.
KRS 286.1-011, 286.1-020, KRS 286.12-050, KRS 286.12-080
(3) Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect.
(a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year?
This administrative regulation will not generate new revenue.
(b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years?
This administrative regulation will not generate new revenue.
(c) How much will it cost to administer this program for the first year?
Costs to administer this regulation will be absorbed into the annual Department budget for the current fiscal cycle.
(d) How much will it cost to administer this program for subsequent years?
In subsequent years, dedicated staff will be needed to perform our regulatory functions. The costs incurred will be a one-time cost for employee equipment of $20,000.00, then approximately $482,000.00 per year for salary, benefits, and travel costs.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Revenues (+/-):
Expenditures (+/-):
Other Explanation:
(4) Estimate the effect of this administrative regulation on the expenditures and cost savings of regulated entities for the first full year the administrative regulation is to be in effect.
(a) How much cost savings will this administrative regulation generate for the regulated entities for the first year?
This administrative regulation is not expected to generate cost savings to the regulated entities.
(b) How much cost savings will this administrative regulation generate for the regulated entities for subsequent years?
This administrative regulation is not expected to generate cost savings to the regulated entities.
(c) How much will it cost the regulated entities for the first year?
This administrative regulation is not expected to incur additional costs to the regulated entities for the first year.
(d) How much will it cost the regulated entities for subsequent years?
This administrative regulation is not expected to impose additional costs to the regulated entities in subsequent years.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Cost Savings (+/-):
Expenditures (+/-):
Other Explanation:
This regulation relates to record keeping requirements and prohibited activities of the licensee. Record keeping is expected to be an ongoing and required business activity and adhering to regulatory requirements should not require additional costs. Prohibited activities should be avoided by the licensee and with compliance, the licensee should not incur additional costs.
(5) Explain whether this administrative regulation will have a major economic impact, as defined below.
"Major economic impact" means an overall negative or adverse economic impact from an administrative regulation of five hundred thousand dollars ($500,000) or more on state or local government or regulated entities, in aggregate, as determined by the promulgating administrative bodies. [KRS 13A.010(13)] This regulation will not have a major economic impact on the student loan servicer industry.
PUBLIC PROTECTION CABINET
Kentucky Department of Financial Institutions
Student Education Loan Servicers
(New Administrative Regulation)
808 KAR 16:020.Recordkeeping requirements; unfair, deceptive, or predatory practices.
Section 1.
Definitions.(1)
"Best financial interest of the borrower" means reducing the total cost of a student loan, including principal balance, interest, and fees to the borrower.(2)
"Commissioner" is defined by KRS 286.1-010(1).(3)
"Necessary information" includes the following:(a)
A schedule for all transactions credited or debited to the student loan account;(b)
A copy of the promissory note for the student loan;(c)
Notes created by a student loan servicer's personnel reflecting communication with the borrower regarding the student loan account;(d)
A report of the data fields relating to the borrower's student loan account created by the student loan servicer's electronic systems in connection with servicing practices;(e)
Copies of electronic records or any information or documents provided by the borrower to the student loan servicer;(f)
Usable data fields with information necessary to assess qualification for forgiveness, including public service loan forgiveness, if applicable; and(g)
Any information necessary to compile payment history.(4)
"Negative financial consequences" includes:(a)
Negative credit reporting;(b)
Loss or denial of eligibility for a borrower benefit or protection established under federal law or by contract; and(c)
Late fees, interest capitalization, and other financial injury.(5)
"Qualified request" means a request made by a borrower to a student loan servicer in which the borrower either:(a)
Requests specific information from the student loan servicer; or(b)
Reports what the borrower believes to be an error regarding the borrower's account.(6)
"Student loan servicer" and "servicer" are defined by KRS 286.12-010(13).Section 2.
A student loan servicer shall:(1)
Process student loan payments pursuant to the servicer's established payment processing policies, which shall be disclosed and readily accessible to borrowers;(2)
Credit student loan payments to the borrower's account in accordance with the following:(a)
A payment received before 11:59 p.m. on the date on which that payment is due, in the amount, manner, and location indicated by the servicer, shall be credited as effective on the date on which the payment was received by the servicer. A servicer shall treat a payment received from the borrower on the borrower's due date as an on-time payment;(b)
If a payment is made by check, a servicer shall credit the payment on the date the check was received by the servicer regardless of the date of processing;(c)
If the servicer receives a check with no identifying account information, the servicer shall:1.
Within ten (10) days, determine to which account and loan the payment should be credited and credit the payment as of the date it was received by the servicer; and2.
Update the borrower's online account within one (1) business day of the determination made under (a) of this subparagraph;(d)
If the borrower submits an overpayment to the student loan servicer, the servicer shall inquire of a borrower, either through electronic communication or in writing, to which account the borrower prefers to apply an overpayment. A borrower's direction regarding application of an overpayment to a student loan account shall be effective with respect to future overpayments during the term of a student loan, until the borrower provides to the servicer written alternative instructions regarding overpayment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate an overpayment in a manner consistent with the best financial interest of the borrower; and(e)
If the borrower submits a partial payment, except as otherwise provided by a student loan agreement, comply with the direction provided by a borrower, regarding which account to allocate a partial payment. In the absence of a direction provided by a borrower, the student loan servicer shall allocate a partial payment in a manner consistent with the best financial interest of the borrower;(3)
Not assess negative financial consequences related to the material change by a servicer of the mailing address, office, or procedures for handling borrower payments causing a delay in the crediting of a borrower payment;(4)
Supervise and monitor actions of service providers, including maintaining policies and procedures to oversee compliance by third-party service providers engaged in all aspects of student loan servicing;(5)
Manage and process loan accounts and paperwork, consistent with existing federal requirements, and maintain records ensuring the servicer's personnel have received the following:(a)
Training on the management and processing of accounts and corresponding paperwork; and(b)
Access to necessary account information regarding forms and applications that have been approved, denied, or are in process, applications for income-driven repayment plans, and all forms required to access benefits and protections for federal student loans, pursuant to 20 U.S.C. secs. 1070 et seq., as amended;(6)
Unless a longer period of time is stipulated by a student loan agreement or by federal law, maintain all records regarding a borrower's account for the period of time during which a servicer performs student loan servicing and for a minimum of three (3) years after the loan serviced has been paid in full or assigned to collections, or the servicing rights have been transferred;(7)
Institute and maintain policies and procedures permitting a borrower who is dissatisfied with the outcome of an initial qualified request to escalate the borrower's concern to a supervisor or higher level of review;(8)
Not take actions resulting in negative financial consequences that are directly related to the issue identified in a borrower's qualified request, until that request has been resolved;(9)
Not take actions resulting in negative financial consequences that are directly related to a sale, assignment, transfer, system conversion, or payment made by the borrower to the original student loan servicer consistent with the original student loan servicer's policy;(10)
If a sale, assignment, or other transfer of the servicing of a student loan, results in a change in the identity of the party to whom the borrower is required to send payments or direct any communications concerning the student loan account, notify the borrower, in writing, fifteen (15) days prior to the date the borrower's payment is due on the student loan account, of the following:(a)
If applicable, the license number issued by the commissioner of the new student loan servicer;(b)
The name and address of the new student loan servicer to whom subsequent payments or communications are to be sent;(c)
The telephone numbers and the Web sites of the new student loan servicer;(d)
The effective date of the sale, assignment, or transfer;(e)
The date on which the current student loan servicer will stop accepting payments on the borrower's student loan account; and(f)
The date on which the new student loan servicer will begin accepting payments on the borrower's student loan;(11)
Transfer all necessary information regarding a borrower, a borrower's account, and a borrower's complete student loan history to any new student loan servicer within forty-five (45) calendar days of the effective date of the sale, assignment, or transfer;(12)
Provide and maintain a record of specialized training for customer service personnel to inform:(a)
Military borrowers about student loan repayment benefits and protections;(b)
Borrowers working in public service about student loan repayment benefits and protections;(c)
Older borrowers about the risks specifically applicable to older borrowers to ensure that, once identified, older borrowers are informed about student loan repayment benefits and protections, including discharge or loan forgiveness programs for private and federal loans, if applicable; and(d)
Borrowers with disabilities about student loan repayment benefits and protections, including disability discharge programs for private and federal loans;(13)
Respond to a qualified request by:(a)
Acknowledging, in writing or through electronic communication, receipt of the request within ten (10) business days; and(b)
Within thirty (30) business days of receipt of the request, providing information relating to the status of the request and, if applicable, either the action the student loan servicer will take to correct the account or an explanation for a determination that the borrower's account is correct.1.
The thirty (30) day period set out in subsection (13)(b) of this Section may be extended for fifteen (15) days if, before the end of the thirty (30) day period, the servicer notifies the borrower of the extension and the reason for the delay in responding; and2.
A servicer is required to send a borrower up to three subsequent notices stating there will be no response to a qualified request if the borrower has previously submitted the same request and received a complete response, and no new information is submitted in subsequent, duplicative qualified requests;(14)
Respond within ten (10) business days to communications from the Commissioner;(15)
Provide information to borrowers, in writing, about the availability of loan forgiveness programs and income-driven repayment plan opportunities;(16)
Maintain on its website, free of charge, complete information and account records for each borrower, which shall;(a)
Be accessible to the borrower only, through a secure log-in system;(b)
Include a consolidated account report for each borrower, and a loan history for each student loan serviced; and(c)
Be available to borrowers at all times, except for occasional, short periods of time when the student loan servicer's system is not available because the system is undergoing routine maintenance or is blocked for security reasons.1.
The consolidated account report required under this subsection shall include:a.
Borrower name;b.
Number of student loan(s) serviced for each borrower;c.
Loan number, for each student loan;d.
Loan type, i.e., Direct Loan; FFELP Loan; Perkins Loan; or private student loan;e.
Loan disbursement amount and date, for each student loan;f.
Interest rate(s) and maturity date, or number of monthly payments required to repay the loan, for each student loan;g.
Loan balance and status, for each student loan;h.
Cumulative balance owing for each borrower;i.
Whether the borrower has an application pending for, or is repaying under, an alternative repayment plan, and listing the plan chosen by the borrower; andj.
Whether the borrower has an application pending for any loan forgiveness, cancellation, or discharge benefit and current status of the application; and2.
The loan history required under this subsection shall include the following information, including the corresponding dates or data range, for each:a.
disbursements;b.
interest accruals;c.
fees;d.
late charges;e.
any other miscellaneous amounts charged to the borrower;f.
payments received;g.
payments toward loan forgiveness programs; andh.
the borrower's repayment plan;(17)
Upon request by a borrower, within seven (7) days, provide a borrower, free of charge, a complete and accurate payoff statement. The statement shall clearly indicate the date on which it was prepared, the relevant time frame for submission of the payoff amount, and any circumstances which may change the amount required to pay off the loan account. A student education loan servicer is required to provide one (1) payoff statement per quarter, at no charge to the borrower, upon request. Thereafter, the student loan servicer may charge the borrower the actual cost to produce a physical copy of the account record.JUSTIN BURSE, Acting Commissioner
RAY PERRY, Secretary
APPROVED BY AGENCY: January 13, 2023
FILED WITH LRC: January 13, 2023 at 11:50 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on March 28, 2023, at 2:00 p.m., at 500 Mero Street, Frankfort, Kentucky 40601. Individuals interested in being heard at this hearing shall notify this agency in writing by five workdays prior to the hearing, of their intent to attend. If no notification of intent to attend the hearing was received by that date, the hearing may be cancelled. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through March 31, 2023. Send written notification of intent to be heard at the public hearing or written comments on the proposed administrative regulation to the contact person.
CONTACT PERSON: Catherine Falconer, General Counsel, 500 Mero Street, 2 SW 19, Frankfort, Kentucky 40601, phone 502-782-9052, fax 502-573-8787, email Catherine.Falconer@ky.gov and Marni Gibson, Acting Deputy Commissioner, Dept. of Financial Institutions, 500 Mero Street, 2SW19, Frankfort, Kentucky 40601, phone 502-782-9053, fax 502-573-8787, email Marni.Gibson@ky.gov.
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Catherine Falconer
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation establishes standards that a student loan servicer must abide by in order to maintain accurate records and prevent unfair, deceptive, abusive, or predatory practices.
(b) The necessity of this administrative regulation:
KRS 286.12 was a new statute enacted in the 2021-2022 legislative session. These regulations set forth the requirements and procedures for student loans servicers to follow regarding record and account management along with providing guidance to the licensees regarding unfair, deceptive, abusive, and predatory practices.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
KRS 286.12-050 requires specific records be maintained by the servicer along with a three-year record retention of all account records upon closure of the account. These account records include books, records, correspondence, and accounts of the borrower, to be provided to the Department when required or upon examination, to confirm compliance. KRS 286.12-080 sets forth specific prohibitions of deceptive or abusive acts or practices by the licensee. This administrative regulation provides specific guidance as to appropriate and responsible student loan servicer account management and communication with relevant parties.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation will assist the Department to maintain oversight of the student loans servicers industry by requiring licensee to abide by record retention schedules for specific account records and for proper oversight of account management for the benefit and protection of the borrower.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
N/A
(b) The necessity of the amendment to this administrative regulation:
N/A
(c) How the amendment conforms to the content of the authorizing statutes:
N/A
(d) How the amendment will assist in the effective administration of the statutes:
N/A
(3) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
This regulation effects all student loan servicers that have accounts for Kentucky citizens. The exact number of individuals and businesses affected by this regulation will fluctuate depending upon the number and status of the loans in a given year. There are 74 non-exempt entities licensed in NMLS as student education loan servicers that the Department anticipates will be affected by this administrative regulation.
(4) Provide an analysis of how the entities identified in question (3) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (3) will have to take to comply with this administrative regulation or amendment:
All industry participants are required to maintain account records to be compliant with statutory requirements. Specifically, Licensees are required to maintain correspondence between servicer and borrower, maintain records related to payments and application of payments to proper accounts and all account related updates and program applications. The Licensee is required to maintain adequate training and to provide servicer personnel with all required information needed to adequately maintain account records to mitigate abuse, misleading information, or predatory account practices as well as provide required services in the best interest of the borrower. Regulated entities will need to implement proper procedures to ensure servicing standards are met and the borrower is provided with relevant information regarding account management while working in the best interests of the borrower.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (3):
Servicers are required to maintain account records; therefore, there should be no additional cost to implement the requirements.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (3):
All participants, servicers, and borrowers will benefit from process efficiencies and timely information exchanges between servicers and borrowers, along with maintaining the borrower on the lowest cost loan basis which will assist in mitigation of misapplied payments, abusive practices, and participation in the least advantageous loan payment programs to the borrower.
(5) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
Initially, there is no additional costs to the Department to implement the new regulations. The Department will utilize current staff to process these applications and maintain reviews of submissions through the national database.
(b) On a continuing basis:
On a continuing basis, dedicated staff will be needed to perform our regulatory functions. The subsequent cost to the Department will be a one-time cost for employee equipment of $20,000.00, then approximately $482,000.00 per year for salary, benefits, and travel costs.
(6) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation:
Revenue will be generated through submission of registration, renewal, and other fees to the Department.
(7) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No increase in fees or funding will be necessary to implement and enforce this regulation.
(8) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
This regulation does not establish or effect any fees.
(9) TIERING: Is tiering applied?
Tiering is not applicable to these regulations based on the nature and subject matter contained within. This regulation relates to record keeping and account management.
FISCAL NOTE
(1) What units, parts, or divisions of state or local government (including cities, counties, fire departments, or school districts) will be impacted by this administrative regulation?
The Department of Financial Institutions
(2) Identify each state or federal statute or federal regulation that requires or authorizes the action taken by the administrative regulation.
KRS 286.1-011, 286.1-020, KRS 286.12-050, KRS 286.12-080
(3) Estimate the effect of this administrative regulation on the expenditures and revenues of a state or local government agency (including cities, counties, fire departments, or school districts) for the first full year the administrative regulation is to be in effect.
(a) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for the first year?
This administrative regulation will not generate new revenue.
(b) How much revenue will this administrative regulation generate for the state or local government (including cities, counties, fire departments, or school districts) for subsequent years?
This administrative regulation will not generate new revenue.
(c) How much will it cost to administer this program for the first year?
Costs to administer this regulation will be absorbed into the annual Department budget for the current fiscal cycle.
(d) How much will it cost to administer this program for subsequent years?
In subsequent years, dedicated staff will be needed to perform our regulatory functions. The costs incurred will be a one-time cost for employee equipment of $20,000.00, then approximately $482,000.00 per year for salary, benefits, and travel costs.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Revenues (+/-):
Expenditures (+/-):
Other Explanation:
(4) Estimate the effect of this administrative regulation on the expenditures and cost savings of regulated entities for the first full year the administrative regulation is to be in effect.
(a) How much cost savings will this administrative regulation generate for the regulated entities for the first year?
This administrative regulation is not expected to generate cost savings to the regulated entities.
(b) How much cost savings will this administrative regulation generate for the regulated entities for subsequent years?
This administrative regulation is not expected to generate cost savings to the regulated entities.
(c) How much will it cost the regulated entities for the first year?
This administrative regulation is not expected to incur additional costs to the regulated entities for the first year.
(d) How much will it cost the regulated entities for subsequent years?
This administrative regulation is not expected to impose additional costs to the regulated entities in subsequent years.
Note: If specific dollar estimates cannot be determined, provide a brief narrative to explain the fiscal impact of the administrative regulation.
Cost Savings (+/-):
Expenditures (+/-):
Other Explanation:
This regulation relates to record keeping requirements and prohibited activities of the licensee. Record keeping is expected to be an ongoing and required business activity and adhering to regulatory requirements should not require additional costs. Prohibited activities should be avoided by the licensee and with compliance, the licensee should not incur additional costs.
(5) Explain whether this administrative regulation will have a major economic impact, as defined below.
"Major economic impact" means an overall negative or adverse economic impact from an administrative regulation of five hundred thousand dollars ($500,000) or more on state or local government or regulated entities, in aggregate, as determined by the promulgating administrative bodies. [KRS 13A.010(13)] This regulation will not have a major economic impact on the student loan servicer industry.