Consumer Loans To Students - Private Postsecondary Institutions - CA Education

Section § 94916

If a school or institution gives you a loan for educational expenses, any document showing you owe money (like a promissory note) must clearly display a notice. This notice tells you that you can use any arguments or defenses against the loan collector that you could use against the school, up to the amount you've already paid.

An institution extending credit or lending money to an individual for institutional and noninstitutional charges for an educational program shall cause any note, instrument, or other evidence of indebtedness taken in connection with that extension of credit or loan to be conspicuously marked on its face in at least 12-point type with the following notice:

“NOTICE”

“You may assert against the holder of the promissory note you signed in order to finance the cost of the educational program all of the claims and defenses that you could assert against this institution, up to the amount you have already paid under the promissory note.”

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(Amended by Stats. 2014, Ch. 840, Sec. 27. (SB 1247) Effective January 1, 2015. Repealed as of January 1, 2027, pursuant to Section 94950.)

Section § 94917

This law states that if a school wants to make someone sign a note or agreement to pay for an education program, the school must have the proper approval or registration to operate. If the school doesn't have this approval at the time of signing, the payment agreement is not valid or enforceable.

A note, instrument, or other evidence of indebtedness relating to payment for an educational program is void and not enforceable unless, at the time of execution of the note, instrument, or other evidence of indebtedness, the institution held an approval to operate or valid out-of-state registration with the bureau.

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(Amended by Stats. 2022, Ch. 544, Sec. 11. (SB 1433) Effective January 1, 2023. Repealed as of January 1, 2027, pursuant to Section 94950.)

Section § 94918

This law requires that when a school offers student loans, they must follow the rules set by the Federal Truth in Lending Act, which is a federal law found in Title 15 of the U.S. Code. This act ensures that consumers get clear, truthful information about the terms and costs of loans.

In making consumer loans to students, an institution shall also comply with the requirements of the Federal Truth in Lending Act pursuant to Title 15 of the United States Code.

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(Added by Stats. 2009, Ch. 310, Sec. 6. (AB 48) Effective January 1, 2010. Repealed as of January 1, 2027, pursuant to Section 94950.)

Section § 94918.5

This section makes it clear that the Department of Financial Protection and Innovation (DFPI) still has authority over private postsecondary educational institutions, despite the bureau administering specific articles. The California Consumer Financial Protection Law still applies to these covered persons. Furthermore, this law does not regulate financial products or services offered by institutions under this chapter, ensuring that DFPI can maintain its oversight over such products and services. Also, an institution's status with the bureau doesn't grant it authority when providing financial products or services.

(a) The bureau’s administration of this article or Article 13 (commencing with Section 94919) shall not preclude the authority of the Department of Financial Protection and Innovation over, and application of the California Consumer Financial Protection Law to, any “covered persons” as defined by subdivision (f) of Section 90005 of the Financial Code, including, but not limited to, private postsecondary educational institutions.

(b) Nothing in this chapter shall constitute regulation of an institution’s financial product or service pursuant to subparagraph (B) of paragraph (2) of subdivision (a) of Section 90009 of the Financial Code, or shall otherwise be construed to limit the Department of Financial Protection and Innovation’s jurisdiction with respect to an institution’s financial product or service.

(c) An institution subject to this chapter shall not be considered “acting under the authority” of its status with the bureau pursuant to subdivision (a) of Section 90002 of the Financial Code when offering financial products or services.

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(Added by Stats. 2022, Ch. 544, Sec. 12. (SB 1433) Effective January 1, 2023. Repealed as of January 1, 2027, pursuant to Section 94950.)