Chapter 3Licensee Duties

Section § 28126

Explanation

Licensees must inform the commissioner in writing about any changes to their license application information within 10 business days of the change. If a licensee wants to change their business address, they need to notify the commissioner at least 10 days before the move. The commissioner will let the licensee know if the address change is disapproved, otherwise, it's approved after 10 days. If a licensee fails to notify about an address change or starting student loan servicing at a new location at least 10 days in advance, they might face a penalty up to $500.

(a)CA Financial Code § 28126(a) A licensee shall notify the commissioner, in writing, of any change in the information provided in the application for a license, as applicable, not later than 10 business days after the occurrence of the event that results in the information becoming inaccurate or incomplete.
(b)Copy CA Financial Code § 28126(b)
(1)Copy CA Financial Code § 28126(b)(1) If a licensee seeks to change its place of business to a street address other than that designated in its license, the licensee shall provide notice to the commissioner at least 10 days prior to the change. The commissioner shall notify the licensee within 10 days if the commissioner disapproves the change, and if the commissioner does not notify the licensee of disapproval within 10 days, the change in address shall be deemed approved.
(2)CA Financial Code § 28126(b)(2) If notice is not given at least 10 days prior to the change of a street address of a place of business, as required by subdivision (b), or notice is not given at least 10 days prior to engaging in the business of servicing student loans at a new location, the commissioner may assess a civil or administrative penalty on the licensee not to exceed five hundred dollars ($500).
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(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)

Section § 28128

Explanation

This law requires a student loan servicing company to submit an application and pay a fee if they want to start operating at a new location. They must submit the application at least 10 days before starting operations at the new place. If approved, they can begin business 10 days after applying. The commissioner has 90 days to approve or deny the person responsible for the new location. If denied, the company must provide a new responsible person within 10 days. The business must use an approved name when operating at a new location. Changes in street address do not count as a new location needing a new application under this section.

(a)CA Financial Code § 28128(a) A licensee seeking to engage in the business of servicing student loans at a new location shall submit an application for a branch office license to the commissioner at least 10 days before engaging in the business of servicing student loans at a new location and pay the fee required by Section 28112.
(b)CA Financial Code § 28128(b) The licensee may engage in the business of servicing student loans at the new location 10 days after the date of submission of a branch office application.
(c)Copy CA Financial Code § 28128(c)
(1)Copy CA Financial Code § 28128(c)(1) The commissioner shall approve or deny the individual responsible for the servicing activity of the licensee at the new location in accordance with Article 2 of Chapter 2 (commencing with Section 28112), and shall notify the licensee of this decision within 90 days of the date of receipt of the application.
(2)CA Financial Code § 28128(c)(2) If the commissioner denies the application, the licensee shall, within 10 days of the date of receipt of notification of the commissioner’s denial, submit a new application to the commissioner designating a different individual responsible for the servicing activity of the licensee at the new location. The commissioner shall approve or deny the different individual as provided in paragraph (1).
(d)CA Financial Code § 28128(d) A licensee shall not engage in the business of servicing student loans at a new location in a name other than a name approved by the commissioner.
(e)CA Financial Code § 28128(e) A branch office license to engage in the business of servicing at a new location shall be issued in accordance with this section. A change of street address of a place of business designated in a license shall be made in accordance with Section 28126 and shall not constitute a new location subject to the requirements of this section.
student loan servicing new location application branch office license fee payment application approval responsible individual denial process commissioner approval operating at new location business name approval change of address application submission timing new location servicing operating timeline name approval
(Amended by Stats. 2018, Ch. 379, Sec. 13. (AB 38) Effective January 1, 2019.)

Section § 28130

Explanation

This law requires a licensee to take several important actions. They must create policies to follow the rules of the division and report to the commissioner as needed. They’re also responsible for complying with the division's regulations and orders, and allowing the commissioner to examine their operations periodically. If they file for bankruptcy, they must inform the commissioner within five days. Additionally, they need to provide information about loan repayment and forgiveness options on their website and communicate this to borrowers at least once a year.

A licensee shall do all of the following:
(a)CA Financial Code § 28130(a) Develop policies and procedures reasonably intended to promote compliance with this division.
(b)CA Financial Code § 28130(b) File with the commissioner any report required by the commissioner.
(c)CA Financial Code § 28130(c) Comply with the provisions of this division and any regulation or order of the commissioner.
(d)CA Financial Code § 28130(d) Submit to periodic examination by the commissioner as required by this division and any regulation or order of the commissioner.
(e)CA Financial Code § 28130(e) Advise the commissioner of filing a petition for bankruptcy within five days of the filing.
(f)CA Financial Code § 28130(f) Provide, free of charge on its internet website information or links to information regarding repayment and loan forgiveness options that may be available to borrowers and provide this information or these links to borrowers via written correspondence or email at least once per calendar year.
compliance policies reporting requirements commissioner examination bankruptcy notification loan repayment options loan forgiveness information annual borrower communication financial licensing obligations internet information disclosure borrower resources communication financial division regulations compliance procedures periodic examinations bankruptcy filing notification digital borrower resources
(Amended by Stats. 2020, Ch. 154, Sec. 5. (AB 376) Effective January 1, 2021.)

Section § 28132

Explanation

This section outlines circumstances in which a licensee is not required to respond to qualified written requests from borrowers. First, if a request is essentially a repeat of a previous one and does not provide new, important information that could change the earlier response, the licensee doesn't have to reply. Second, if the request is too broad and unclear about what error or information is being asked about, the licensee can ignore it unless a specific issue can be identified.

Finally, if the request is received more than a year after the loan servicing has been transferred to another company, the licensee is not obligated to respond. In any case where the licensee decides not to respond, they must inform the borrower in writing within five business days, explaining why they made that decision.

(a)CA Financial Code § 28132(a) A licensee shall not be required to comply with the requirements of subdivision (g) of Section 28130, if the licensee reasonably determines that any of the following apply:
(1)CA Financial Code § 28132(a)(1) A qualified written request is substantially the same as a qualified written request previously made by the borrower, for which the licensee has previously complied with its obligation to respond pursuant to subdivision (g) of Section 28130, unless the borrower provides new and material information to support the more recent qualified written request. New and material information means information that was not reviewed by the licensee in connection with a prior qualified written request submitted by the same borrower and that is reasonably likely to change the licensee’s prior response related to that request.
(2)CA Financial Code § 28132(a)(2) A qualified written request is overbroad. A qualified written request is overbroad if the licensee cannot reasonably determine from the qualified written request the specific error that the borrower asserts has occurred on his or her account or the specific information the borrower is requesting related to his or her account. To the extent a licensee can reasonably identify a valid assertion of an error or valid request for information in a qualified written request that is otherwise overbroad, the licensee shall comply with the requirements of subdivision (g) of Section 28130 with respect to that valid asserted error or request for information.
(3)CA Financial Code § 28132(a)(3) A qualified written request is delivered to the licensee more than one year after the licensee sells, assigns, or transfers the servicing of the student loan that is the subject of the qualified written request to another servicer.
(b)CA Financial Code § 28132(b) If, pursuant to subdivision (a), a licensee determines that it is not required to comply with the requirements of subdivision (g) of Section 28130, the licensee shall notify the borrower of the determination, and the basis for its determination, in writing not later than five business days after making such determination.
qualified written request licensee obligation new and material information overbroad request loan servicing transfer borrower notification student loan servicing duplicate request prior response error assertion request for information written determination response exemption servicer transfer information request clarity
(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)

Section § 28138

Explanation

This law requires student loan service providers to keep records of a borrower’s student loan for at least three years after the loan is sold, transferred, or fully paid off, unless a federal law says otherwise.

Notwithstanding subdivision (b) of Section 28134 and unless prohibited by federal law, a licensee shall retain and maintain its records of servicing a borrower’s student loan for a minimum of three years after the student loan has been sold, assigned, transferred, or paid in full.
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(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)

Section § 28140

Explanation

This law requires certain financial companies to always have at least $250,000 in net worth. If the company is a subsidiary of a public company that reports to the SEC, they can prove they meet this requirement by sharing their annual financial statements from the SEC with the commissioner.

(a)CA Financial Code § 28140(a) A licensee shall continuously maintain a minimum net worth of at least two hundred fifty thousand dollars ($250,000).
(b)CA Financial Code § 28140(b) Subject to the commissioner’s sole discretion, an applicant or licensee that is a wholly owned subsidiary of a public holding company required to comply with the reporting requirements of the Securities and Exchange Commission may satisfy the requirement of subdivision (a) by submitting the annual consolidated audited financial statements filed with the Securities and Exchange Commission, including consolidating financial statements of the subsidiary, which evidence to the commissioner’s satisfaction that the subsidiary meets the continuous minimum net worth requirements of at least two hundred fifty thousand dollars ($250,000).
minimum net worth subsidiary public holding company Securities and Exchange Commission annual consolidated audited financial statements commissioner's discretion financial requirements wholly owned subsidiary consolidating financial statements compliance reporting financial stability financial regulations
(Amended by Stats. 2020, Ch. 154, Sec. 8. (AB 376) Effective January 1, 2021.)

Section § 28142

Explanation

This law requires that any licensed lender maintains a surety bond of at least $25,000. This bond is essentially a financial safeguard and must be issued by an authorized insurer and filed with the commissioner. It's used to cover any costs, penalties, or borrower losses resulting from the lender not following the rules. If a claim is made against the bond, the lender must get a new bond right away; not doing this could mean losing their license. The commissioner might ask for bonds to be filed electronically and could even demand a higher bond if the lender services a lot of student loans.

(a)CA Financial Code § 28142(a) A licensee shall maintain a surety bond in accordance with this section in a minimum amount of twenty-five thousand dollars ($25,000). The bond shall be payable to the commissioner and issued by an insurer authorized to do business in this state. The surety bond, including any and all riders and endorsements executed subsequent to the effective date of the bond, shall be filed with the commissioner within 10 days of execution. For licensees with multiple licensed locations, only one surety bond is required. The bond shall be used for the recovery of expenses, fines, and fees levied by the commissioner in accordance with this division or for losses or damages incurred by borrowers as the result of a licensee’s noncompliance with the requirements of this division. The commissioner may require licensees to submit bonds, riders, and endorsements electronically through the Nationwide Multistate Licensing System & Registry’s electronic surety bond function.
(b)CA Financial Code § 28142(b) When an action is commenced on a licensee’s bond, the commissioner may require the filing of a new bond. Immediately upon recovery of any action on the bond, the licensee shall file a new bond. Failure to file a new bond within 10 days of the recovery on a bond, or within 10 days after notification by the commissioner that a new bond is required, constitutes sufficient grounds for the suspension or revocation of the license.
(c)CA Financial Code § 28142(c) The commissioner may require a higher bond amount for a licensee based on the dollar amount of servicing of student loans by that licensee.
surety bond licensee insurer borrower losses commissioner noncompliance minimum amount penalties bond filing multiple locations student loans servicing bond recovery electronic filing suspension of license revocation of license
(Amended by Stats. 2018, Ch. 379, Sec. 17. (AB 38) Effective January 1, 2019.)

Section § 28144

Explanation

This law requires licensed student loan servicing companies in California to pay their share of the costs associated with regulating their industry. The amount is based on the scale of their operations within the state. Each year, the commissioner will notify companies of the assessed amount, which they must pay by October 31. Late payments incur a penalty. Further, each location must pay at least $250 annually, regardless of size. Failing to pay by the deadline can result in the suspension or revocation of the company's license, allowing hearings if requested within a set time. The Commissioner may also require payments to be made through a nationwide licensing system.

(a)CA Financial Code § 28144(a) Each licensee shall pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of this division, as estimated by the commissioner, for the ensuing year and any deficit actually incurred or anticipated in the administration of the division in the year in which the assessment is made. The pro rata share shall be the proportion that a licensee’s servicing activities in this state bears to the costs and expenses remaining after the amount assessed pursuant to subdivision (c).
(b)CA Financial Code § 28144(b) On or before the 30th day of September in each year, the commissioner shall notify each licensee of the amount assessed and levied against it and that amount shall be paid by October 31. If payment is not made by October 31, the commissioner shall assess and collect a penalty, in addition to the assessment, of 1 percent of the assessment for each month or part of a month that the payment is delayed or withheld.
(c)CA Financial Code § 28144(c) In the levying and collection of the assessment, a licensee shall neither be assessed for nor be permitted to pay less than two hundred fifty dollars ($250) per licensed location per year.
(d)CA Financial Code § 28144(d) If a licensee fails to pay the assessment on or before the 31st day of October, the commissioner may by order summarily suspend or revoke the license issued to the licensee. If, after an order is made, a request for hearing is filed in writing within 30 days, and a hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date. During any period when the license is revoked or suspended, a licensee shall not engage in the business of servicing student loans in this state pursuant to this division except as may be permitted by order of the commissioner. However, the revocation, suspension, or surrender of a license shall not affect the powers of the commissioner as provided in this division.
(e)CA Financial Code § 28144(e) Notwithstanding subdivisions (a) to (d), inclusive, the commissioner may by rule require licensees to pay assessments through the Nationwide Multistate Licensing System & Registry.
student loan servicing license assessment commissioner notification payment deadline late payment penalty minimum assessment license suspension license revocation hearing request nationwide licensing system pro rata share servicing activities administrative costs payment collection licensee obligations
(Amended by Stats. 2018, Ch. 379, Sec. 18. (AB 38) Effective January 1, 2019.)

Section § 28146

Explanation

If you hold a license, you need to submit an annual report to the commissioner by March 15th. This report should include details about your business operations in the state over the past year, like how many loans you've sold or transferred. The public can look at these reports, and they must be completed under oath and in the format the commissioner specifies.

Additionally, you may be required to provide other special reports if the commissioner asks for them.

(a)CA Financial Code § 28146(a) A licensee shall file an annual report with the commissioner, on or before the 15th day of March, giving the relevant information that the commissioner reasonably requires concerning the business and operations conducted by the licensee in the state during the preceding calendar year, including information regarding the number of loans that are sold, assigned, or transferred to another party. The individual annual reports filed pursuant to this section shall be made available to the public for inspection. The report shall be made under oath and in the form prescribed by the commissioner.
(b)CA Financial Code § 28146(b) A licensee shall make other special reports that may be required by the commissioner.
annual report commissioner business operations loan transfer reporting requirements public inspection oath loan sales business activities financial licensee report format March 15 deadline special reports state compliance license obligations
(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)

Section § 28148

Explanation

Every year, license holders must have their financial books and accounts audited by an independent certified public accountant. This audit should be detailed enough to allow the accountant to give an opinion on the company's financial statements, which must follow standard accounting principles.

The opinions can vary from unqualified (good) to adverse (bad), and if there are any issues with the audit result, the commissioner can demand the licensee to fix them within 30 days. If not addressed, it could be a legal violation. The audit report, certified by the accountant, must be submitted within 105 days after the fiscal year ends.

Should the licensee fail to arrange for an audit, the commissioner can have it done at the licensee's cost and may revoke the license if the financial statement isn't filed as required.

(a)CA Financial Code § 28148(a) At the end of the licensee’s fiscal year, but in no case more than 12 months after the last audit conducted pursuant to this section, each licensee shall cause its books and accounts to be audited by an independent certified public accountant. The audit shall be sufficiently comprehensive in scope to permit the expression of an opinion on the financial statements prepared in accordance with generally accepted accounting principles and shall be performed in accordance with generally accepted auditing standards. The audit shall include a reconciliation of the licensee’s trust accounts as of the audit date.
(b)CA Financial Code § 28148(b) “Expression of an opinion” includes (1) an unqualified opinion, (2) a qualified opinion, (3) a disclaimer of opinion, or (4) an adverse opinion. If a financial statement, report, certificate, or opinion of the independent certified public accountant is in any way qualified, the commissioner may require the licensee to take any action that the commissioner deems appropriate to address the qualification. The commissioner may reject any financial statement, report, certificate, or opinion by notifying the licensee or other person required to make the filing of the rejection and the reason therefor. Within 30 days after the receipt of the notice, the licensee or other person shall correct the deficiencies. Failure to correct the deficiencies is a violation of this division. The commissioner shall retain a copy of all financial statements, reports, certificates, or opinions so rejected.
(c)CA Financial Code § 28148(c) If a qualified or adverse opinion is expressed or if an opinion is disclaimed, the reasons therefor shall be fully explained.
(d)CA Financial Code § 28148(d) The audit report shall be filed with the commissioner within 105 days of the end of the licensee’s fiscal year. The report filed with the commissioner shall be certified by the certified public accountant conducting the audit.
(e)CA Financial Code § 28148(e) If a licensee required to make an audit fails to cause an audit to be made, the commissioner may cause the audit to be made by an independent certified public accountant at the licensee’s expense. The commissioner shall select the independent certified public accountant by advertising for bids or by other fair and impartial means. The commissioner may summarily revoke the license of a licensee who fails to file a certified financial statement prepared by an independent certified public accountant as required by this division or at the request of the commissioner.
independent certified public accountant financial audit opinion on financial statements generally accepted accounting principles trust accounts reconciliation qualified opinion adverse opinion financial report deficiencies audit report submission 105 days deadline commissioner actions licensee compliance audit expense responsibility license revocation fiscal year audit
(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)

Section § 28150

Explanation

If a company that services student loans stops doing so, it must notify the commissioner in writing, give up its license, and possibly submit a plan for ending its business operations, which might include a final audit. The commissioner will review the situation to ensure the company followed the rules before accepting the license surrender. A license isn't considered officially surrendered until the commissioner provides written confirmation of its acceptance.

A licensee that ceases to service student loans to borrowers shall inform the commissioner in writing and surrender the license and all other indicia of license to the commissioner. The commissioner may require a licensee to file a plan for the disposition of the servicing business that includes, but is not limited to, a closing audit. Upon receipt of the written notice and plan, if required, the commissioner shall determine whether the licensee has violated this division. The commissioner shall give a licensee notice of accepting a surrendered license, and a license shall not be deemed surrendered until the commissioner accepts its tender in writing.
student loan servicer license surrender commissioner notification cease operations disposition plan closing audit license acceptance servicing business business closure plan financial regulation compliance
(Added by Stats. 2016, Ch. 824, Sec. 2. (AB 2251) Effective January 1, 2017. Operative July 1, 2018, pursuant to Section 28182.)