Legal Seminar, Denver, CO

Student Loan Servicing: Express Preemption

• 20 USC 1098g: “Loans made, insured, or guaranteed pursuant to a program authorized by Title IV of the [HEA] shall not be subject to any disclosure requirements of any State law.’’ • The Notice interprets “disclosure requirements” to encompass informal or non- written communications to borrowers as well as reporting to third parties such as credit reporting bureaus.” • This interpretation is unreasonably broad. – The term “disclosure requirements” refers solely to communications from servicers to borrowers, and not to communications from servicers to regulators through regulatory reporting. – Based on legislative history, it appears Congress intended to prohibit State law disclosure requirements that apply to loan origination, but not disclosure requirements applicable to servicing.

For Discussion Purposes Only

Student Loan Servicing: Legislation

• In December 2017, Rep. Foxx introduced the PROSPER Act (H.R. 4508) – Section 494E would preempt any State law relating to the servicing or collection of loan made under the federal student loan programs and provide that federal student loan servicers shall not be required to obtain state licenses to engage in student loan servicing.

• The bill was reported out of committee in February 2018 but a vote has yet to be scheduled.

• In May 2018, CSBS sent a letter opposing this provision of the legislation because it would be preempt recently-enacted state servicing laws as well as state debt collection laws applied to student loan debt collectors.

For Discussion Purposes Only