Aug 26 – A bill introduced during next year’s General Assembly will place restrictions on Kentucky student loan providers and give the state power to investigate student loan misconduct and levy fines.
The bill was submitted by Congressman Putting Minter, a Bowling Green Democrat, and Rep. Attica Scott, a Louisville Democrat. Miner said in a press release that the bill is called the Student Loan Borrowers Bill of Rights.
If approved, the bill would require student loan providers doing business in Kentucky to be licensed by the state. The license may be revoked or suspended if the provider is found to be engaging in “dishonest or unfair practices that could cause significant harm” to the borrowers.
The bill empowers the Department of Financial Institutions Commission to investigate complaints against student loan providers by obtaining documents, holding hearings, and persuasive sworn testimony. Lenders who engaged in prohibited practices may be fined.
Minter, a professor at Western Kentucky University, said the bill aims to provide transparency so that borrowers understand the terms of their loan agreements.
“I’ve heard students complain about many aspects of the student loan industry,” Minter said Wednesday.
Minter first filed the bill during the opening days of the 2021 legislative session. The bill was submitted to the commission, but it was never put to a vote.
Minter said she spoke to one person who never missed a student loan for 10 years, but only reduced the principal of his loan by $ 700.
“She signed a predatory agreement,” Minter said. “People don’t know what they are signing because providers are not required to disclose anything.”
The bill states that service providers cannot prevent a borrower from understanding the terms of his loan or exploiting his lack of understanding.
“This will require the student loan processor to be fully transparent in their records,” Minter said. “It’s a lot like the mortgage industry.”
The bill would also bar student loan providers from threatening a borrower’s credit rating and would allow borrowers to sue the providers.
“There are many disclosure rules in the mortgage industry,” Minter said. “The (student loan) industry is wild west and it’s time for us to level the playing field to make sure the deck doesn’t stack up against borrowers.
Other states, including Illinois and Virginia, have passed similar bills.
“If the government is known to have weak oversight … it becomes a magnet for predatory lenders,” Minter said.
If the bill is passed, the repayment terms and interest rates should be clearly stated in student loan agreements “so everyone understands what they are signing and what their responsibilities are,” Minter said.
James Mays, 270-691-7303, firstname.lastname@example.org, Twitter: @JamesMayse
James Mayes, 270-691-7303, email@example.com, Twitter: @JamesMayse