On October 6, 2021, Governor Newsom signed a tough new law protecting California debtors who have unpaid private student loans. The new law, called the Private Student Loan Collections Reform Act ("PSLCRA"), mandates that debt collectors provide a full list of information to a debtor before trying to collect on an unpaid private student loan. The same information must be available and provided as a condition for filing a debt collection action in California State Courts. The PSLCRA also protects cosigners, guarantors and others who might owe or are alleged to owe any unpaid amount on a private education loan.
This is a victory for California debtors. Holders of private student loan debt will be unable to collect on the debts if they do not have all the required information. Note, however, that the PSLCRA does not apply to more traditional "student loans," which are guaranteed by the federal government or not-for-profit institutions. However, the PSLCRA will still provide significant relief to the hundreds of thousands of Californians with private student loans. As reported here, as of June 2020, in excess of 650,000 Californians owed $10.3 billion in private student loan debt.
Debt collection companies -- including lenders -- must provide these 18 categories of information before attempting to collect on a private student loan or bringing a collection action. The list is long, but worth reading and understanding. As can be seen, some of the information may be very difficult for the debt collector to find, particularly if the debt collector has purchased the loan from the original lender or from an assignee of the original loan. From the text of the PSLCRA, the required information includes:
- The name of the owner of the private education loan.
- The creditor’s name at the time of default, if applicable.
- The creditor’s account number used to identify the private education loan at the time of default, if the original creditor used an account number to identify the private education loan at the time of default.
- The amount due at default.
- An itemization of interest, if any, that has accrued on the private education loan.
- An itemization of fees, if any, claimed to be owed on the private education loan and whether those fees were imposed by the original creditor or any subsequent owners of the private education loan.
- The date that the private education loan was incurred.
- The date of the first partial payment or the first day that a payment was missed, whichever is earlier, that precipitated default.
- The date and amount of the last payment, if applicable.
- Any payments, settlement, or financial remuneration of any kind paid to the creditor by a guarantor, surety, or other party not obligated on the loan as compensation under a separate contract that provides coverage for financial losses incurred as a result of default, if applicable.
- The names of all persons or entities that owned the private education loan after the time of default, if applicable, and the date of each sale or transfer.
- A copy of the self-certification form and any other “needs analysis” conducted by the original creditor prior to origination of the loan.
- Documentation establishing that the creditor is the owner of the specific individual private education loan at issue. If the private education loan was assigned more than once, the creditor shall possess each assignment or other writing evidencing the transfer of ownership of the specific individual private education loan to establish an unbroken chain of ownership, beginning with the original creditor to the first subsequent creditor and each additional creditor. Each assignment or other writing evidencing transfer of ownership or the right to collect shall contain the original creditor’s account number (redacted for security purposes to show only the last four digits) of the private education loan purchased or otherwise assigned, the date of purchase and assignment, and shall clearly show the borrower’s correct name associated with the original account number. The assignment or other writing attached shall be that by which the creditor or other assignee acquired the private education loan, not a document prepared for litigation.
- A copy of all pages of the contract, application, or other documents evidencing the debtor’s liability for the private education loan, stating all terms and conditions applicable to the private education loan.
- A list of all collection attempts made in the last 12 months, including date and time of all calls and written communications.
- A statement as to whether the creditor is willing to renegotiate the terms of the private student loan.
- Copies of all written settlement communications made in the last 12 months, or, in the alternative, a statement that the creditor has not attempted to settle or otherwise renegotiate the debt prior to suit.
- A statement as to whether the private education loan is eligible for an income-based repayment plan.
Any debt collector who attempts to collect on a private student loan debt or brings a collection lawsuit without providing this information can be sued by the debtor. Those who have been victimized by violations of the PSLCRA can sue and recover:
- Actual damages or statutory damages of $500 per violation
- Restitution of all moneys taken from or paid pursuant to a default judgement by a person whose rights under the PSLCRA
In addition, courts are empowered to issue injunctive relief including an Order:
- Vacating default judgments
- Requiring the private education loan debt collector to furnish correct information to a consumer reporting agency
- Requiring the private education loan debt collector to request that a consumer reporting agency correct a consumer report or remove derogatory information furnished to it after default
If a class action lawsuit is filed and if the court finds that the private education loan debt collector engaged in "a pattern and practice of violating any provision of the PSLCRA," the court may award additional damages to the class in an amount not to exceed the lesser of $500,000 or 1% of the net worth of the defendant.
Contact an Experienced Consumer Rights Attorney
For more information, contact the Consumer and Debtor Rights attorneys at Guardian Litigation Group. We have the tools and legal experience necessary to protect you and to recover money damages for you if your rights under the PSLCRA have been violated. Our Mission is to provide unparalleled legal services and support to consumers and financially distressed individuals. We can be reached via our contact page or by phone at (949) 312-4226.