Kentucky recently enacted HB 494, titled the “Student Education Loan Servicing, Licensing, and Protection Act of 2022,” which will require student loan servicers to be licensed in Kentucky. The Act applies to administrators of private student loans and federal student loans.
Private student loan servicers must submit a license application to the Commissioner of the Kentucky Department of Financial Institutions that includes certain specified information, including the name of at least one managing director who has at least two years of experience in the student education. the loan servicing industry. Among other requirements, an applicant must achieve and maintain a minimum net worth of an amount to be prescribed by the Commissioner. After obtaining the permit, any change of control will require the prior written approval of the commissioner.
Companies that only service federal student loans will automatically be deemed authorized to service federal student loans in Kentucky; however, these businesses must submit a notification package (instead of an application for a license) to the Commissioner and are prohibited from engaging in the service of non-federal student loans unless they are otherwise exempt or qualify. they got a license.
All licensed student loan servicers, including federal student loan servicers, must comply with the substantive requirements of the Act, including:
- Retain all records for at least three years after satisfaction of a loan (this requirement also applies to license-exempt entities);
- Pay an annual appraisal fee, which will be based on volume of loans serviced in Kentucky or for Kentucky residents;
- Annual filing of a written renewal report which must include recent annual audited financial statements and information on the volume and dollar amount of loans repaid in Kentucky; and
- Not engage in any unfair, deceptive or abusive acts or practices.
The Act provides a private right of action and authorizes the Commissioner to impose civil penalties of up to $25,000 per violation for violations of the Act. It also authorizes the commissioner to require license applications to be submitted through the National Multistate Licensing System (NMLS). Currently, there does not appear to be any information regarding when and where the application form will be available.
Finally, the law comes into effect 90 days after the official adjournment of the legislative session, the last day of which is April 14, 2022.