Legislation designed to help student loan borrowers in Virginia refinance student loans and improve the oversight of lenders died in the state House on February 14th after passing in the Virginia Senate 36-4. As of now, the only option for student loan borrowers to refinance student loans is through the private sector.
Virginia Senate Bill 1053, introduced by Senator Janet Howell (D-Fairfax), would have prevented any person or company from acting as a qualified education loan servicer without a state license from the state; banks and credit unions would have been exempt from this licensing rule.
The bill would have also stipulated a civil penalty of as much as $2,500 for misrepresenting the amount and terms of the loans. This stipulation would have covered cases of knowingly misapplying loan payments and failing to report both favorable and unfavorable payment history to consumer credit agencies.
While the bill had the support of the Senate and state Democrats, it failed to win enough support in the House of Representatives despite extensive support for Virginia residents. The reaction from supporters of the bill was swift.
“The House of Delegates has yet again failed student loan borrowers,” said Anna Scholl, executive director of Progress Virginia, an advocacy group in the report. Scholl noted that Virginia has more than 1 million student loan borrowers, many of which need relief from their mounting student loan bills.
The move by Virginia lawmakers to get the deal pushed through the House comes at a time when student loan servicers are under increased scrutiny by the Consumer Financial Protection Bureau (CFPB). In January, the CFPB charged the nation’s largest servicer of student loans, Navient, with cheating borrowers out of billions of dollars by impeding student loan repayment. Navient’s practices, argued the CFPB, resulted in the debt holders paying higher interest rates and balances.
Last August, the CFPB took action against Wells Fargo, the national bank, charging it with similar so-called illegal private student loan practices. The CFPB ordered Wells Fargo to pay $410,000 in relief to the borrowers who were hurt by its practices and a $3.6 million civil fine to the CFPB.
Author: Donna Fuscaldo
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