STATE OF NEW YORK ________________________________________________________________________ 5598 2025-2026 Regular Sessions IN SENATE February 25, 2025 ___________ Introduced by Sen. MAY -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law and the civil practice law and rules, in relation to protecting private education loan borrowers and cosigners The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The general business law is amended by adding a new article 2 42-A to read as follows: 3 ARTICLE 42-A 4 PRIVATE EDUCATION LOAN PROTECTIONS 5 Section 1200. Definitions. 6 1201. Applicability. 7 1202. Exempt organizations. 8 1203. Provisions applicable to cosigners. 9 1204. Prohibition on acceleration of payments on private educa- 10 tion loans. 11 1205. Required communications from creditors and debt collec- 12 tors. 13 1206. Required information to be provided by creditors and debt 14 collectors. 15 1207. Enforcement. 16 1208. Rules and regulations. 17 § 1200. Definitions. As used in this article: 18 1. "Private education loan" means an extension of credit that: 19 (a) is not made, insured, or guaranteed under title IV of the Higher 20 Education Act of 1965 (20 U.S.C. 1070 et seq.); 21 (b) is extended to a consumer expressly, in whole or in part, for 22 higher education expenses, regardless of whether the loan is provided by 23 the educational institution that the student attends; EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD08810-01-5
S. 5598 2 1 (c) does not include open-end credit or any loan that is secured by 2 real property or a dwelling; and 3 (d) does not include an extension of credit in which the covered 4 educational institution is the creditor if: 5 (i) the term of the extension of credit is ninety days or less; or 6 (ii) an interest rate or finance charge will not be applied to the 7 credit balance and the term of the extension of credit is one year or 8 less, even if the credit is payable in more than four installments. 9 2. "Private education lender", except as exempted under this article, 10 means: 11 (a) any person or entity engaged in the business of securing, making, 12 or extending private education loans; or 13 (b) any holder of a private education loan. 14 3. "Borrower" or "private education loan borrower" means a person who 15 has received or agreed to pay a private education loan for such person's 16 own educational expenses. 17 4. "Cosigner" (a) means: 18 (i) any individual who is liable for the obligation of another without 19 compensation, regardless of how designated in the contract or instrument 20 with respect to that obligation, including an obligation under a private 21 education loan extended to consolidate a borrower's pre-existing private 22 education loans; and 23 (ii) includes any person the signature of which is requested as condi- 24 tion to grant credit or to forbear on collection; 25 (b) does not include a spouse of an individual described in subpara- 26 graph (i) of paragraph (a) of this subdivision, the signature of whom is 27 needed to perfect the security interest in a loan. 28 5. "Original creditor" means the private education lender identified 29 in a promissory note, loan agreement, or loan contract entered into with 30 a private education loan borrower or cosigner. 31 6. "Creditor" means: 32 (a) the original creditor, where ownership of a private education loan 33 debt has not been sold, assigned, or transferred; 34 (b) the person or entity that owned the private education loan debt at 35 the time the debt became delinquent or defaulted, even if that person or 36 entity did not originate the private education loan, and where such a 37 debt has not subsequently been sold, transferred or assigned; or 38 (c) a person or entity that purchased a delinquent or defaulted 39 private education loan debt for collection purposes, whether it collects 40 the debt itself, hires a third party for collection, or hires an attor- 41 ney for collection litigation. 42 7. "Debt collector" means any person who regularly collects or 43 attempts to collect, directly or indirectly, consumer debts originally 44 owed or due or asserted to be owed or due another. The term does not 45 include any officer or employee of a creditor who, in the name of the 46 creditor, collects debts for such creditor, but it does include any 47 creditor who, in the process of collecting its own debts, uses any name 48 other than its own which would indicate that a third person is collect- 49 ing or attempting to collect such debts. 50 8. "Higher education expense" means any expense arising from higher 51 education, as defined in section two of the education law, regardless of 52 whether the higher education institution is accredited within New York 53 state. 54 § 1201. Applicability. 1. Any person or entity that enters into a 55 contract or subcontract with a private education lender or servicer to
S. 5598 3 1 perform the servicing of a private education loan must fulfill the obli- 2 gations of the private education lender under this article. 3 2. Any private education lender as described in subdivision two of 4 section twelve hundred of this article be jointly and severally liable 5 for the actions of the entity or person in fulfilling the obligations of 6 the private educational lender or servicer under this article. 7 § 1202. Exempt organizations. The following shall be exempt from the 8 provisions of this article only to the extent that state regulation is 9 preempted by federal law: 10 1. Any banking organization, foreign banking corporation, national 11 bank, federal savings association, federal credit union, or any bank, 12 trust company, savings bank, savings and loan association, or credit 13 union organized under the laws of any other state; and 14 2. Any subsidiary of such entities set forth in subdivision one of 15 this section. 16 § 1203. Provisions applicable to cosigners. 1. (a) Prior to the origi- 17 nation of a private education loan, the private education lender shall 18 provide to all cosigner applicants information about the rights and 19 responsibilities of the cosigner of the loan, including: 20 (i) information about how the private education lender will furnish 21 information about the cosigner's private education loan obligation to 22 credit reporting agencies; 23 (ii) information about how the cosigner will be notified if the 24 private education loan becomes delinquent, including how the cosigner 25 can cure the delinquency in order to avoid negative credit furnishing 26 and loss of cosigner release eligibility; and 27 (iii) information about eligibility for release of the cosigner's 28 obligation on the private education loan, including number of on-time 29 payments and any other criteria required to approve the release of 30 cosigner from the loan obligation. 31 (b) Lenders shall send borrowers and cosigners annual written notices 32 containing information about cosigner release, including criteria the 33 lender requires to approve the release of cosigner from the loan obli- 34 gation and the process for applying for cosigner release. 35 (c) Once the borrower has met the applicable consecutive on-time 36 payment requirement to be eligible for cosigner release, the lender 37 shall send the borrower and cosigner a written notification by U.S. mail 38 and by electronic mail, where a borrower has elected to receive elec- 39 tronic communications from the lender, informing the borrower and cosig- 40 ner that such person has met the applicable consecutive, on-time 41 payments requirement to be eligible for cosigner release. The notifica- 42 tion shall also include information about any additional criteria to 43 qualify for cosigner release, and the procedure to apply for cosigner 44 release. 45 (d) Lenders shall provide written notice within fifteen days to any 46 borrower who applies for cosigner release, but whose application is 47 incomplete. The written notice must include a description of the infor- 48 mation needed to consider the application complete and the date by which 49 the applicant should furnish the missing information. 50 (e) After a borrower submits a complete application for cosigner 51 release, within thirty days, the lender shall send the borrower and 52 cosigner a written notice that informs the borrower and cosigner whether 53 the cosigner release application has been approved or denied. If the 54 lender denies a request for cosigner release, the lender shall inform 55 the borrower of such person's right to request all documents and infor- 56 mation used in the determination, including the credit score threshold
S. 5598 4 1 used by the lender, the borrower's consumer report, the borrower's cred- 2 it score, and any other documents specific to the borrower. The lender 3 must also provide any adverse action notices required under applicable 4 federal law if the denial is based in whole or in part on any informa- 5 tion contained in a consumer report. 6 2. (a) In response to any written or oral request for cosigner 7 release, lenders shall send the information described in paragraph (b) 8 of subdivision one of this section. 9 (b) Lenders shall not impose any restrictions that may permanently bar 10 a borrower from qualifying for cosigner release, including restricting 11 the number of times a borrower may apply for cosigner release. 12 (c) Lenders shall not impose any negative consequences on any borrower 13 or cosigner during the sixty days following the issuance of the notice 14 required under paragraph (d) of subdivision one of this section, or 15 until the lender makes a final determination about a borrower's cosigner 16 release application. For the purpose of this paragraph, "negative conse- 17 quences" includes, but is not limited to, the imposition of additional 18 eligibility criteria, negative credit reporting, lost eligibility for 19 cosigner release, late fees, interest capitalization, or other financial 20 injury. 21 (d) Lenders shall not require greater than twelve consecutive, on-time 22 payments as criteria to apply for cosigner release. Any borrower who has 23 paid the equivalent of twelve months of principal and interest payments 24 within any twelve-month period will be considered to have satisfied the 25 consecutive, on-time payment requirement, even if the borrower has not 26 made payments monthly during the twelve-month period. 27 (e) If a borrower or cosigner requests a change that restarts the 28 count of consecutive, on-time payments required for cosigner release, 29 the lender shall notify the borrower and cosigner in writing within ten 30 days of the impact of such an arrangement and provide the borrower or 31 cosigner the right to withdraw or reverse the request to avoid such 32 impact. 33 (f) The borrower has the right to request an appeal of a lender's 34 determination to deny the cosigner release application within ninety 35 days of receiving the lender's determination, and the lender shall 36 permit such borrower to submit additional documentation evidencing that 37 the borrower has the ability, willingness, and stability to handle such 38 person's payment obligations. The borrower may request review of the 39 cosigner release determination by another employee. The lender shall 40 inform the borrower of this right in a clear and conspicuous manner on 41 the notice denying the cosigner release application. 42 (g) A lender must establish and maintain a comprehensive record 43 management system reasonably designed to ensure the accuracy, integrity, 44 and completeness of data and other information about cosigner release 45 applications. This system shall include the number of cosigner release 46 applications received, the approval and denial rate, and the primary 47 reasons for any denial. 48 (h) If a cosigner has a total and permanent disability, as determined 49 by any federal agency, state agency, or physician or doctor of osteopa- 50 thy legally authorized to practice in the state in which the cosigner 51 resides, the lender shall release the cosigner from the cosigner's obli- 52 gation to repay the loan upon receiving a notification of the cosigner's 53 total and permanent disability. The lender shall not require a new 54 cosigner to be added to the loan after the original cosigner has been 55 released from the loan.
S. 5598 5 1 3. (a) A lender shall provide a cosigner of a private education loan 2 with access to all documents or records related to the cosigned private 3 education loan that are available to the borrower; 4 (b) If a lender provides electronic access to documents and records 5 for a borrower, it shall provide equivalent electronic access to the 6 cosigner; and 7 (c) Upon receiving notice from the borrower or cosigner, the lender 8 shall redact the contact information of the other party. 9 § 1204. Prohibition on acceleration of payments on private education 10 loans. 1. Except as provided in subdivision two of this section, a 11 private education loan executed after the effective date of this article 12 may not include a provision that permits the private educational lender 13 to accelerate, in whole or in part, payments on the private education 14 loan. 15 2. A private education loan may include a provision that permits 16 acceleration of the loan in cases of payment default. 17 3. A lender shall not place any loan or account into default or accel- 18 erate a loan for any reason, other than for failure to pay. 19 4. (a) In the event of the death of a cosigner, a lender shall not 20 attempt to collect against the cosigner's estate, other than for failure 21 to pay. 22 (b) Upon receiving notification of the death or bankruptcy of a cosig- 23 ner, when the loan is not more than sixty days delinquent at the time of 24 the notification, a lender shall not change any terms or benefits under 25 the promissory note, repayment schedule, repayment terms, or monthly 26 payment amount or any other provision associated with the loan. 27 (c) A lender shall not place any loan or account into default or 28 accelerate a loan for any reason, other than for failure to pay. 29 § 1205. Required communications from creditors and debt collectors. 30 In addition to any other information required under applicable federal 31 or state law, a creditor or debt collector shall provide, in writing, in 32 the first debt collection communication with the private education loan 33 borrower or cosigner, or within five days thereafter, and at any other 34 time the borrower or cosigner requests such documentation: 35 1. The name of the current owner of the private education loan debt; 36 2. The original creditor's name at the time of origination and, if 37 different, at the time of sale of the loan, if applicable; 38 3. The original creditor's account number used to identify the private 39 education loan debt at the time of sale, if applicable; 40 4. The total outstanding amount owed at the time of default or the 41 amount due to bring the loan current if the loan is delinquent, but not 42 yet in default; 43 5. A schedule of all transactions credited or debited to the private 44 education loan account; 45 6. A copy of all pages of the contract, application or other documents 46 stating all terms and conditions applicable to the private education 47 loan and evidencing the private education loan borrower's or cosigner's 48 liability for the private education loan; and 49 7. A clear and conspicuous statement disclosing that the borrower or 50 cosigner has a right to request all information possessed by the credi- 51 tor related to the private education loan debt, including, but not 52 limited to the information included in section twelve hundred six of 53 this article. 54 § 1206. Required information to be provided by creditors and debt 55 collectors. 1. A creditor or debt collector may not collect or attempt
S. 5598 6 1 to collect a private education loan debt unless the creditor or debt 2 collector possesses the following: 3 (a) The name of the owner of the private education loan; 4 (b) The original creditor's name at the time of sale of the loan or 5 default, if applicable; 6 (c) The original creditor's account number used to identify the 7 private education loan at the time of sale or default, if the original 8 creditor used an account number to identify the private education loan 9 at the time of sale or default; 10 (d) The amount due at the time of sale, or at default, or, if the loan 11 is delinquent, to bring the loan current; 12 (e) A schedule of all transactions credited or debited to the private 13 education loan account; 14 (f) An itemization of interest and fees, if any, claimed to be owed 15 and whether those were imposed by the original creditor or any subse- 16 quent owners of the private education loan; 17 (g) The date that the private education loan was incurred; 18 (h) A billing statement or other account record indicating the date of 19 the first partial payment and/or the first day that a payment was 20 missed, whichever is earlier; 21 (i) A billing statement or other account record indicating the date of 22 the last payment made by the borrower or cosigner, if applicable; 23 (j) Any payments, settlement, or financial remuneration of any kind 24 paid to the creditor by a guarantor, cosigner, or surety, and the amount 25 of payment received; 26 (k) A copy of the self-certification form and any other "needs analy- 27 sis" conducted by the original creditor prior to origination of the 28 loan; 29 (l) A log of all collection attempts made in the previous twelve 30 months including date and time of all calls and written communications; 31 (m) Copies of all written settlement offers sent in the last twelve 32 months, or, in the alternative, a statement that the creditor has not 33 attempted to settle or otherwise renegotiate the debt prior to suit; 34 (n) Copies of all collection letters sent to the borrower and cosigner 35 since inception of the loan; 36 (o) Documentation establishing that the creditor is the owner of the 37 specific individual private education loan at issue. If the private 38 education loan was assigned more than once, the creditor must possess 39 each assignment or other writing evidencing the transfer of ownership of 40 the specific individual private education loan to establish an unbroken 41 chain of ownership, beginning with the original creditor to the first 42 subsequent creditor and each additional creditor. Each assignment or 43 other writing evidencing transfer of ownership or the right to collect 44 must contain the original creditor's account number (redacted for secu- 45 rity purposes to show only the last four digits) of the private educa- 46 tion loan purchased or otherwise assigned, the date of purchase and 47 assignment, and must clearly show the borrower's, and if applicable, 48 cosigner's correct name associated with the original account number. The 49 assignment or other writing attached shall be that by which the creditor 50 or other assignee acquired the private education loan, not a document 51 prepared for litigation or collection purposes; 52 (p) A copy of all pages of the contract, application or other docu- 53 ments evidencing the private education loan borrower's, and if applica- 54 ble, cosigner's liability for the private education loan, stating all 55 terms and conditions applicable to the private education loan; and
S. 5598 7 1 (q) A signed affidavit or affidavits from each of the previous owners 2 of the private education loan regarding when the previous owner acceler- 3 ated the loan from delinquency status to default status, or if applica- 4 ble, a statement that no such acceleration occurred. 5 2. Upon written or oral request from a borrower or cosigner for any 6 information that a creditor or debt collector is required to possess 7 pursuant to subdivision one of this section, a creditor or debt collec- 8 tor shall send the requested information to the borrower or cosigner 9 within fifteen days of receipt of the request. 10 § 1207. Enforcement. 1. All private education lenders, creditors and 11 debt collectors shall comply with the provisions of this article. 12 2. Whenever it appears to the attorney general, either upon complaint 13 or otherwise, that any person or persons, have suffered damage as a 14 result of a violation of this article by a private education lender, 15 creditor, or debt collector covered by these provisions, the attorney 16 general may bring an action or special proceeding in the name and on 17 behalf of the people of the state of New York to enjoin any violation of 18 this article, to recover or obtain any of the following: 19 (a) actual damages; 20 (b) correction of any inaccurate, negative reporting by the lender, 21 creditor, or debt collector to any credit reporting agency; 22 (c) injunctive relief; and 23 (d) any other relief that the court deems proper. 24 § 1208. Rules and regulations. In addition to such powers as may 25 otherwise be prescribed by this chapter, the attorney general is hereby 26 authorized and empowered to promulgate such rules and regulations as may 27 in the judgment of the attorney general be consistent with the purposes 28 of this article, or appropriate for the effective administration of this 29 article, including, but not limited to: 30 (a) such rules and regulations in connection with the activities of 31 private education lenders, creditors, and debt collectors as may be 32 necessary and appropriate for the protection of borrowers in this state; 33 (b) such rules and regulations as may be necessary and appropriate to 34 define unfair, deceptive or abusive acts or practices in connection with 35 the activities of private education lenders, creditors, and debt collec- 36 tors; 37 (c) such rules and regulations as may define the terms used in this 38 article and as may be necessary and appropriate to interpret and imple- 39 ment the provisions of this article; and 40 (d) such rules and regulations as may be necessary for the enforcement 41 of this article. 42 § 2. Subdivision (q-1) of section 105 of the civil practice law and 43 rules, as added by chapter 593 of the laws of 2021, is amended to read 44 as follows: 45 (q-1) Original creditor. The term "original creditor" means the entity 46 that owned a consumer credit account at the date of default giving rise 47 to a cause of action, except that if the consumer credit account is a 48 private education loan, as defined in subdivision one of section twelve 49 hundred of the general business law, "original creditor" means the 50 private education lender identified in a promissory note, loan agree- 51 ment, or loan contract entered into with a private education loan 52 borrower or cosigner. 53 § 3. Severability. If any clause, sentence, paragraph, subdivision, 54 section or part of this act shall be adjudged by any court of competent 55 jurisdiction to be invalid, such judgment shall not affect, impair, or 56 invalidate the remainder thereof, but shall be confined in its operation
S. 5598 8 1 to the clause, sentence, paragraph, subdivision, section or part thereof 2 directly involved in the controversy in which such judgment shall have 3 been rendered. It is hereby declared to be the intent of the legislature 4 that this act would have been enacted even if such invalid provisions 5 had not been included herein. 6 § 4. This act shall take effect on the sixtieth day after it shall 7 have become a law.