Private Student Loan Collections Reform Act - Obligations Arising From Particular Transactions - Civil Law - CA

Section § 1788.200

This law is officially called the Private Student Loan Collections Reform Act.

This title shall be known and may be cited as the Private Student Loan Collections Reform Act.

Private Student Loan Collections Reform student debt ...

Section § 1788.201

This section defines important terms related to private education loans in California. A "borrower" is anyone who has received or agreed to pay such a loan. A "cosigner" is someone who is responsible for the loan if the borrower defaults, excluding spouses who are needed for security purposes. A "creditor" can be the original loan issuer or someone who buys a defaulted loan. A "debtor" is anyone who owes money on these loans. "Exempt entities" are certain financial institutions with few collection actions allowed per year. The "original creditor" is who initially lent the money, while a "private education lender" is anyone involved in making or holding these loans. A "private education loan" is specifically for postsecondary education and excludes government-backed, open-ended, and real estate-secured loans. Finally, the text defines who can be a "private education loan collector."

For purposes of this title, the following definitions apply:

(a) “Borrower” or “student loan borrower” means a person who has received or agreed to pay a private education loan.

(b) “Consumer report” and “consumer reporting agency” shall each have the same meaning that these terms have under the federal Fair Credit Reporting Act (15 U.S.C. Sec. 1681 et seq.).

(c)

(1) “Cosigner” means any individual who is liable for the obligation of another without compensation, regardless of how the individual is designated in the contract or instrument with respect to that obligation, including an obligation under a private education loan extended to consolidate a borrower’s preexisting private education loans, and shall include any person whose signature is requested as a condition to grant credit or to forbear on collection.

(2) “Cosigner” does not include a spouse of an individual described in paragraph (1), the signature of whom is needed to perfect the security interest in a loan.

(d) “Creditor” means any of the following:

(1) The original creditor, where ownership of a private education loan has not been sold, assigned, or transferred.

(2) The person or entity that owned the private education loan at the time the private education loan defaulted, even if that person or entity did not originate the private education loan, and where such a private education loan has not subsequently been sold, transferred, or assigned.

(3) A person or entity that purchased a defaulted private education loan, whether it collects the private education loan itself or hires a third party for collection, or hires an attorney for collection litigation.

(e) “Debtor” means a borrower, cosigner, or other person that owes or is alleged to owe an unpaid amount on a private education loan.

(f)

(1) “Exempt entity” means an entity that meets both of the following requirements:

(A) It is a depository institution as defined in Section 1420 of the Financial Code.

(B) It, together with its affiliates, will be, in the aggregate, a plaintiff in 35 or fewer private student loan collection actions in the current calendar year. Private education loans assigned to a third party for the purposes of collection shall count towards the numerical limit set forth in this subparagraph.

(2) For purposes of this subdivision, an entity is an “affiliate” of another specified entity if it directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the other specified entity.

(g) “Original creditor” means the private education lender identified in a promissory note, loan agreement, or loan contract entered into with a student loan borrower or cosigner.

(h) “Private education lender” means either of the following:

(1) Any person or entity engaged in the business of securing, making, or extending private education loans.

(2) Any holder of a private education loan.

(i) “Private education loan” means an extension of credit that meets all of the following conditions:

(1) Is not made, insured, or guaranteed under Title IV of the Higher Education Act of 1965 (20 U.S.C. Sec. 1070 et seq.).

(2) Is extended to a consumer expressly, in whole or in part, for postsecondary educational expenses, regardless of whether the loan is provided by the educational institution that the student attends.

(3) Does not include open-end credit or any loan that is secured by real property or a dwelling.

(4) Does not include an extension of credit in which the covered educational institution is the original creditor if either:

(A) The term of the extension of credit is 90 days or less.

(B) An interest rate will not be applied to the credit balance and the term of the extension of credit is one year or less, even if the credit is payable in more than four installments.

(j) “Private education loan collection action” means any suit, arbitration, or other legal proceeding in which a claim is asserted to collect a private education loan.

(k) “Private education loan collector” means a person, other than a private education lender, collecting or attempting to collect on a defaulted private education loan.

student loan borrower cosigner creditor ...

Section § 1788.202

This law ensures that private education lenders or loan collectors must have detailed information about a debtor's loan, like the original loan owner's name and account details, before they can try to collect any debt. They must provide this information to the debtor upon default or request, including loan amounts, interest and fees, payment history, and ownership changes. They must also share loan terms, collection attempts, and possibilities for renegotiation or income-based repayment plans if applicable.

(a) A private education lender or a private education loan collector shall not make any written statement to a debtor in an attempt to collect a private education loan unless the private education lender or private education loan collector possesses the following information:

(1) The name of the owner of the private education loan.

(2) The creditor’s name at the time of default, if applicable.

(3) The creditor’s account number used to identify the private education loan at the time of default, if the original creditor used an account number to identify the private education loan at the time of default.

(4) The amount due at default.

(5) An itemization of interest, if any, that has accrued on the private education loan.

(6) An itemization of fees, if any, claimed to be owed on the private education loan and whether those fees were imposed by the original creditor or any subsequent owners of the private education loan.

(7) The date that the private education loan was incurred.

(8) The date of the first partial payment or the first day that a payment was missed, whichever is earlier, that precipitated default.

(9) The date and amount of the last payment, if applicable.

(10) Any payments, settlement, or financial remuneration of any kind paid to the creditor by a guarantor, surety, or other party not obligated on the loan as compensation under a separate contract that provides coverage for financial losses incurred as a result of default, if applicable.

(11) The names of all persons or entities that owned the private education loan after the time of default, if applicable, and the date of each sale or transfer.

(12) A copy of the self-certification form and any other “needs analysis” conducted by the original creditor prior to origination of the loan.

(13) Documentation establishing that the creditor is the owner of the specific individual private education loan at issue. If the private education loan was assigned more than once, the creditor shall possess each assignment or other writing evidencing the transfer of ownership of the specific individual private education loan to establish an unbroken chain of ownership, beginning with the original creditor to the first subsequent creditor and each additional creditor. Each assignment or other writing evidencing transfer of ownership or the right to collect shall contain the original creditor’s account number (redacted for security purposes to show only the last four digits) of the private education loan purchased or otherwise assigned, the date of purchase and assignment, and shall clearly show the borrower’s correct name associated with the original account number. The assignment or other writing attached shall be that by which the creditor or other assignee acquired the private education loan, not a document prepared for litigation.

(14) A copy of all pages of the contract, application, or other documents evidencing the debtor’s liability for the private education loan, stating all terms and conditions applicable to the private education loan.

(15) A list of all collection attempts made in the last 12 months, including date and time of all calls and written communications.

(16) A statement as to whether the creditor is willing to renegotiate the terms of the private student loan.

(17) Copies of all written settlement communications made in the last 12 months, or, in the alternative, a statement that the creditor has not attempted to settle or otherwise renegotiate the debt prior to suit.

(18) A statement as to whether the private education loan is eligible for an income-based repayment plan.

(b)

(1) In addition to any other information required under applicable federal or state law, a private education lender or private education loan collector shall provide the information set forth in subdivision (a) in the first written collection communication with a debtor after the first of either of the following:

(A) Default and acceleration.

(B) A period of 12 consecutive months of default.

(2) A private education lender or private education loan collector shall provide the information set forth in subdivision (a) to the debtor upon the debtor’s request if both of the following are true:

(A) An event described in subparagraph (A) or (B) of paragraph (1) has occurred.

(B) The debtor has not requested or received the information set forth in subdivision (a) within the previous 12 months.

private education loan debt collection loan default ...

Section § 1788.203

This law requires that any settlement between a private education lender or loan collector and a borrower must be documented either in court or in writing, and the borrower must receive a copy. If a payment is made that settles the loan completely, the lender or collector must give the borrower a final statement within 30 days. This statement must show detailed information including payment details, account numbers, and confirm that nothing is owed on the loan. If both parties agree, this information can be sent electronically.

(a) All settlement agreements between a private education lender or private education loan collector and a debtor shall be documented in open court or otherwise reduced to writing. The private education lender or private education loan collector shall ensure that a copy of the written agreement is provided to the debtor.

(b) A private education lender or private education loan collector that accepts a payment as payment in full, or as a full and final compromise of a private education loan, shall provide, within 30 calendar days, a final statement that shall clearly and conspicuously show the amount and date paid, the name of the entity paid, the current account number, the name of the private education lender or private education loan collector, the account number issued by the private education lender or private education loan collector, the name of the owner of the private education loan, and that a zero balance is owing. The statement may be provided electronically if the parties agree.

private education loan settlement documented agreement final payment statement ...

Section § 1788.204

This law states that a private education lender or loan collector cannot start a lawsuit, arbitration, or any legal process to collect on a private education loan once the time limit for taking legal action has run out.

A private education lender or private education loan collector shall not bring suit or initiate an arbitration or other legal proceeding to collect a private education loan if the applicable statute of limitations for the private education lender’s or private education loan collector’s claim has expired.

private education lender private education loan collector initiate arbitration ...

Section § 1788.205

This law outlines what information a private education lender or loan collector must include when suing to collect a private education loan. The complaint must show that legal deadlines haven’t expired and that certain information and documents are attached and accurate. However, sensitive personal information does not have to be publicly disclosed. If the lender provides a special declaration, showing they are exempt, these rules may not apply.

In an action brought by a private education lender or private education loan collector to collect a private education loan:

(a) The complaint shall allege all of the following:

(1) The information required by paragraphs (1) to (11), inclusive, of subdivision (a) of Section 1788.202.

(2) That the applicable statute of limitations has not expired.

(3) That the plaintiff has complied with Section 1788.202.

(b) Copies of the documents required by paragraphs (12) to (14), inclusive, of subdivision (a) of Section 1788.202 shall be attached to the complaint.

(c) The requirements of this title shall not be deemed to require the disclosure in public records of personal, financial, or medical information, the confidentiality of which is protected by any state or federal law.

(d) This section does not apply to a plaintiff that attaches to the complaint a declaration or affidavit pursuant to Section 2015.5 of the Code of Civil Procedure that is signed by a natural person and states all of the following:

(1) That the plaintiff is an exempt entity.

(2) The category in subdivision (a) of Section 1420 of the Financial Code under which the plaintiff falls.

(3) The name and title of the signer.

(4) That the signer has been authorized by the entity to make the affidavit or declaration.

private education loan complaint requirements statute of limitations ...

Section § 1788.206

This California law specifies that for a private education lender to get a judgment against a borrower, they must present certain authenticated documents to the court that prove the loan details and the default. If they don't comply, they can't get a judgment by default, and the court might dismiss the case. The law does not change existing procedures for default judgments except when specific exemptions apply. Certain plaintiffs with proper affidavits or declarations may bypass these document requirements.

(a) In an action initiated by a private education lender or private education loan collector, no default or other judgment may be entered against a defendant unless documents are submitted by the plaintiff to the court to establish the facts required to be alleged by paragraphs (1) and (2) of subdivision (a) of Section 1788.205. The documents shall be properly authenticated and each shall be in a form that would be admissible as a business record under Section 1271 of the Evidence Code.

(b) In an action initiated by a private education lender or private education loan collector, no default or other judgment may be entered against a defendant unless copies of the documents described in subdivision (b) of Section 1788.205 have been submitted by the plaintiff to the court. These documents shall be properly authenticated and each shall be in a form that would be admissible as a business record under Section 1271 of the Evidence Code.

(c) In any action on a private education loan, if a plaintiff seeks a default judgment and has not complied with the requirements of this title, the court shall not enter a default judgment for the plaintiff and may, in its discretion, dismiss the action.

(d) Except as provided in this title, this section is not intended to modify or otherwise amend the procedures established in Section 585 of the Code of Civil Procedure.

(e) This section does not apply to a plaintiff that attaches to the complaint a declaration or affidavit pursuant to Section 2015.5 of the Code of Civil Procedure that is signed by a natural person and states all of the following:

(1) That the plaintiff is an exempt entity.

(2) The category in subdivision (a) of Section 1420 of the Financial Code under which the plaintiff falls.

(3) The name and title of the signer.

(4) That the signer has been authorized by the entity to make the affidavit or declaration.

private education lender default judgment authenticated documents ...

Section § 1788.207

This law allows someone who didn't get notified about a lawsuit from a private education lender in time to respond to ask the court to undo any default decisions made against them. They can request permission to defend themselves using specific procedures outlined elsewhere.

Notwithstanding Section 473.5 of the Code of Civil Procedure, if service of a summons has not resulted in actual notice to a person in time to defend an action brought by a private education lender or a private education loan collector and a default or default judgment has been entered against the person in the action, the person may serve and file a notice of motion and motion to set aside the default or default judgment and for leave to defend the action utilizing the procedures set forth in Section 1788.61.

private education lender actual notice default judgment ...

Section § 1788.208

This law allows individuals to sue creditors or student loan collectors if they violate any part of this law. Plaintiffs can receive money for actual damages, at least $500 for each violation, or even higher damages in some cases. If a person wins their case, they may also get their attorney fees paid. However, if the lawsuit wasn't in good faith, defendants might get their attorney fees covered instead. In class action cases, courts can charge more if there's a pattern of violations. If the violation was accidental and the lender has systems to avoid mistakes, they may not be held liable. You need to file a lawsuit within a year after finding out about the violation or receiving specific legal notices.

(a) A person may bring a cause of action against a creditor, private education lender, or private education loan collector for a violation of any provision of this title in order to recover or obtain any of the following:

(1) Damages in an amount equal to the sum of the following:

(A) Any actual damages sustained by that person as a result of the violation.

(B) Statutory damages in an amount as the court may allow, which shall not be less than five hundred dollars ($500) per violation.

(2) Damages pursuant to Section 3294.

(3) An order vacating any default judgment entered against that person.

(4) Restitution of all moneys taken from or paid by that person after a default judgment was entered in favor of the private education lender or private education loan collector.

(5) An order directing the private education lender or private education loan collector to do one or more of the following:

(A) Request that a consumer reporting agency correct a consumer report that it issues.

(B) Request that a consumer reporting agency remove derogatory information furnished to it after default.

(C) Furnish correct information to a consumer reporting agency.

(6) Any other relief that the court deems proper.

(b) In the case of a class action, a defendant that violates any provision of this title shall be liable for any statutory damages for each named plaintiff as provided in subparagraph (B) of paragraph (1) of subdivision (a). If the court finds that the defendant engaged in a pattern and practice of violating any provision of this title, the court may award additional damages to the class in an amount not to exceed the lesser of five hundred thousand dollars ($500,000) or 1 percent of the net worth of the defendant.

(c)

(1) In the case of any successful cause of action under this section, the court shall award costs of the action, together with reasonable attorney’s fees as determined by the court.

(2) Reasonable attorney’s fees may be awarded to a prevailing defendant upon a finding by the court that the plaintiff’s prosecution of the cause of action was not in good faith.

(d) A private education lender or private education loan collector shall have no civil liability for damages under this section if the private education lender or private education loan collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error, and occurred notwithstanding the maintenance of procedures reasonably adopted to avoid any error.

(e) A cause of action to enforce any liability created by this title shall be brought within one year from the date of the discovery by the plaintiff of the last violation, or, in the event a default judgment is entered against the debtor, one year from the date the borrower first receives a writ, notice, or order under Division 1 (commencing with Section 680.010) or Division 2 (commencing with Section 695.010) of Title 9 of Part 2 of the Code of Civil Procedure, whichever is later.

creditors private education lenders private education loan collector ...

Section § 1788.209

This law means that you cannot give up or agree not to follow the rules in this title, as such waivers are against public policy and won't be recognized as valid.

Any waiver of the provisions of this title is contrary to public policy, and is void and unenforceable.

waiver public policy void ...

Section § 1788.210

This law states that if one part of the law is found to be invalid or unenforceable, it doesn't affect the rest of the law. The remaining parts can still be applied and enforced on their own.

The provisions of this title are severable. If any provision of this title or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

severable provisions invalid provision partial invalidity ...

Section § 1788.211

This law section started being effective on July 1, 2022.

This title shall become operative on July 1, 2022.

effective date July 1 2022 ...

Obligations Arising From Particular Transactions

Obligations Arising From Particular TransactionsPrivate Student Loan Collections Reform Act