On July 15, the Rhode Island governor signed HB 5936, which creates the “Student Loan Bill of Rights Act” to define responsibilities for student loan servicers and establish guidelines related to the issuance of postsecondary loans. Notably, federal or state chartered banks or credit unions, as well as their wholly owned subsidiaries, that originate student loans or act as servicers are exempt from the majority of the act’s requirements, including sections 19-33-4, 19-33-6 through 19-33-11, 19-33-12(9), and 19-33-14.

The act requires non-exempt student loan servicers that service at least six or more postsecondary student loans within a consecutive 12 month period to comply with certain requirements, including (i) registering with the Department of Business Regulation (Department) no later than September 30 “or within 30 days of conducting student loan servicing, whichever is earlier”; (ii) maintaining loan transaction records; (iii) filing annual reports with the Department; (iv) disclosing repayment program terms and refinance options to borrowers; and (v) responding to borrower inquiries within specified time frames concerning, among other things, credit reporting disputes, application of payments, and record transfers.

Additionally, the act prohibits student loan servicers from, among other things, (i) employing any scheme designed to defraud or mislead borrowers; (ii) engaging in unfair or deceptive practices; (iii) misapplying payments; (iv) failing to report payment histories to credit bureaus; (iv) failing to communicate with a borrower’s authorized representative; (v) making false statements or omitting material facts in connection with information filed with a government agency or provided in the course of an investigation; and (vi) failing to properly evaluate a borrower’s eligibility for public service loan forgiveness programs or income-driven repayment programs.

The act gives the Department authority to conduct investigations and examinations of registered servicers, as well as impose fines of not more than $2,000 per violation. Furthermore, the Rhode Island attorney general may enforce violations of prohibited conduct as unlawful acts or practices. The act is effective immediately.

The Department of Education has issued an interpretation that servicers that are servicing Direct Loans for the Department of Education would be exempt from state licensing and substantive requirements, but the act does not accommodate that interpretation.