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Nevada to regulate student loan servicers and lenders
On June 14, the Nevada governor signed AB 332 (the “Act”) which provides for the licensing and regulation of student loan servicers. The Act also implements provisions for the regulation of private education loans and lenders. Among other things, the Act requires, subject to certain exemptions, persons servicing student loans to obtain a license from the Commissioner of Financial Institutions. Specifically, the Act states that a person seeking to act as a student loan servicer is exempt from the application requirements only if the commissioner determines that the person’s servicing performed in the state is conducted pursuant to a contract awarded by the U.S. Secretary of Education.
The Act also outlines numerous requirements relating to licensing applications, including that the commissioner may participate in the Nationwide Multistate Licensing System and Registry (NMLS), and may instruct NMLS to act on his or her behalf to, among other things, collect and maintain records of applicants and licensees, collect and process fees, process applications, and perform background checks. The commissioner is also permitted to enter into agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, the State Regulatory Registry, or other such associations. Additional licensing provisions set forth requirements relating to licensing renewals, reinstatements, surrenders, and denials; liquidity standards; and bond requirements. The commissioner is also granted general supervisory, investigative, and enforcement authority relating to student loan servicers and student education loans and may impose civil penalties for violations of the Act’s provisions. The commissioner must conduct investigations and examinations at least once a year (with licensees being required to pay for such investigations and examinations). The Act further provides that the student loan ombudsman shall enter into an information sharing agreement with the office of the attorney general to facilitate the sharing of borrower complaints.
With respect to private education lenders, the Act establishes certain protections for cosigners of private education loans and prohibits private education lenders from accelerating the repayment of a private education loan, in whole or in part, except in cases of payment default. A lender may be able to accelerate payments on loans made prior to January 1, 2024, provided the promissory note or loan agreement explicitly authorizes an acceleration based on established criteria. The Act also sets forth responsibilities for lenders in the case of the total and permanent disability of a private education loan borrower or cosigner, including cosigner release requirements. Additional provisions outline prohibited conduct and create requirements and prohibitions governing lenders’ business practices. Furthermore, private education lenders are not exempt from any applicable licensing requirements imposed by any other specific statute.
The Act becomes effective immediately for the purpose of adopting any regulations and performing any preparatory administrative tasks that are necessary to carry out the provisions of the Act and on January 1, 2024 for all other purposes.