In 2019, the Student Borrower Bill of Rights (SBOR) was introduced by Assemblymember Mark Stone as AB 376 and was sponsored by the Student Borrower Protection Center, a non-profit advocacy group. AB 376 was supported by a coalition of 70 civil rights, higher education, and consumer advocacy organizations The bill was signed into law by Governor Newsom in 2020 and became effective 01/01/2021.  

Lack of Student Borrower Protections Prior to the SBOR, CA borrowers had minimal federal protections and unlike mortgages or credit cards, there was no industry-wide framework at the federal level to regulate the student loan industry. As a result, student borrowers did not have safeguards to help them get out of debt. Additionally, borrowers were faced with navigating a terribly complex and confusing repayment system and a student loan market plagued with predatory practices. Servicers were found to routinely lose paperwork, misapply payments, be unresponsive, give inaccurate information, and even steer borrowers into repayment options that added to the overall cost of their loans to the point of causing them to fall behind on payments and slide toward default. These unfair and deceptive practices made student loan debt unaffordable and unmanageable for borrowers.  

Student Borrower Bill of Rights SBOR gives the DFPI authority to regulate student loan servicers who were previously exempt from California’s student loan servicer licensing law, including depository institutions (other than federally chartered credit unions), private postsecondary educational institutions and, to a certain extent, FFELP guaranty agencies.

 

Some of the specific requirements include:  

• Prohibits unfair or deceptive practices toward student borrowers.  
• Establishes special protection for military borrowers, borrowers working in public service, older borrowers, and borrowers with disabilities. 
• Servicers must provide accurate information about repayment options. Borrowers must be given accurate information about income-based repayment plans or other flexible repayment options to avoid default. 
• Servicers and lenders cannot omit important information. They must present all the important information about a loan and not misrepresent the information in any way. 
• Servicers cannot take advantage of misunderstandings. They are required to work in the best interest of borrowers, even if it means missing out on profits.  
• Servicers must process payments and other documents in a timely fashion. Payments that are received before midnight on the payment day should be marked as on time.  
• Servicers and lenders must minimize their fees. Fees are capped at six percent of the amount past due. 
• Servicers must apply payments correctly and in a way that minimizes fees, charges, and interest payments. Overpayments must be posted and processed in the best financial interest of borrower.  
• Servicers must respond to disputes and other requests for information from borrowers either orally or in writing. The servicer must respond to a Qualified Written Request (QWR) within 30 business days 
• Servicers must improve their record keeping and keep their records up to date so borrowers can manage their payments appropriately  
• If a student loan is transferred the servicer must notify the borrower of the new servicer 15 days before the borrower is required to send in a payment. 
• A borrower has the right to legal action against their servicer if they fail to comply with these laws. This is called a ‘Private Right of Action’ and allows borrowers to collect damages and restitution if their rights have been violated.  
• Created Student Loan Services Ombudsperson to serve as advocate for student loan borrowers. 

Why is SBOR significant?

Student loan debt is a nationwide crisis. Borrowers report that the burden of student debt affects every aspect of their lives, from buying a home to choosing a career, from starting a family to saving for retirement. Protecting borrowers not only benefits individual borrowers, but also local economies. Keeping more income in these consumers’ pockets will boost their spending on goods and services, which will create jobs and benefit the economy. 

California is the first state in the nation to establish a robust set of standards that promote financial security and economic justice for California borrowers. By establishing SBOR, California has guaranteed that millions of borrowers have the consumer rights and protections they deserve.  

Our role and the Student Borrower Bill of Rights Within DFPI there is a legal and enforcement unit that monitors student loan servicers and takes legal action as necessary. A supervision unit which examines and licenses private student loan servicers. And a Consumer Services Office (CSO) where student loan borrowers can submit complaints if they’re experiencing problems with their student loan servicer, if they encounter unlawful activity, or if they are victim of fraud or scams. Our focus has been sharpened on student borrowers and we are engaged in multiple activities to oversee the student loan industry and protect student loan borrowers 

In 2020, the Student Loan Services Ombudsperson position was filled as required by SBOR. The ombudsperson works with other divisions within DFPI to evaluate challenges facing student loan borrowers, monitors the development of federal and state laws, rules, regulations, and policies relating to student loan borrowers in our state and partner with other agencies to reach student borrowers. The ombudsperson responds directly to student borrower complaints and works with student borrowers directly.   

For more information, visit https://dfpi.ca.gov/student-loans-borrower-resources.