student loan servicers; licensure

HB2302 - 572R - I Ver

REFERENCE TITLE:
student loan servicers; licensure

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2302

Introduced by

Representatives
Aguilar: Abeytia, Austin, Blattman, Cavero, Connolly, Contreras P, Crews,
Garcia, M�rquez, Sandoval, Simacek, Villegas

AN
ACT

amending title 6, Arizona Revised
Statutes, by adding chapter 18; relating to student loans.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 6, Arizona Revised Statutes,
is amended by adding chapter 18, to read:

CHAPTER 18

STUDENT LOAN SERVICER LICENSING

ARTICLE 1. GENERAL PROVISIONS

START_STATUTE
6-1801.

Definitions

In this chapter, unless the context otherwise
requires:

1. "Servicing" means all of
the following:

(
a
) Receiving
scheduled periodic payments from a student loan borrower pursuant to the terms
of a student education loan.

(
b
) Applying
the payments received pursuant to subdivision (
a
) of this
paragraph pursuant to the student education loan terms.

(
c
) Performing
other administrative services.

2. "Student education loan"
means a loan, notwithstanding an election of law or designation of status in a
contract, used mainly for financing education or other school-related expenses.

3. "Student loan borrower" means
either:

(
a
) A resident
of this state who has received or agreed to pay a student education loan.

(
b
) A person
who shares repayment responsibility with a resident described in subdivision (
a
) of this paragraph.

4. "Student loan servicer"
or "licensee":

(
a
) Means any
person, regardless of location, responsible for servicing a student education
loan to a student loan borrower.�

(
b
) includes
trust entities performing or receiving the benefit of student education loan
servicing and debt collection activities in this state.
END_STATUTE

START_STATUTE
6-1802.

Student loan ombudsman

The position of student loan ombudsman is
established in the department. The ombudsman, in consultation with
the deputy director, must:

1. Receive and review complaints from
student loan borrowers.

2. Attempt to resolve the complaints,
including collaborating with institutions of higher education, student loan
servicers and any other participants in student education loan lending.

3. Compile and analyze complaint
data.

4. Help student loan borrowers
understand their rights and responsibilities under the terms of student
education loans.

5. Provide information to the public,
agencies, legislators and others about student loan borrowers' problems and
concerns and make recommendations for resolution.

6. Analyze
and monitor the development and implementation of federal, state and local laws
on student loan borrowers and recommend necessary changes.

7. Review
the student education loan history for student loan borrowers who give written
consent.

8. Disseminate information about the
ombudsman's availability to help those with servicing concerns, such as student
loan borrowers, potential student loan borrowers, state higher education
institutions and student loan servicers.

9. Take any other actions necessary
to fulfill the ombudsman's duties.

10. Establish a student loan borrower
education course on or before October 1, 2026.� The course must:

(
a
) Include
educational presentations and material about student education loans.

(
b
) Cover key
student education loan terms, documentation requirements, monthly payment
obligations, income-based repayment options, student education loan forgiveness
and disclosure requirements.
END_STATUTE

START_STATUTE
6-1803.

Student loan servicers; licenses; exceptions; applications;
denial

A. A person acting as a student loan
servicer must obtain a license from the deputy director.

B. The following are exempt from this
chapter:

1. A bank or credit union.

2. A wholly owned subsidiary of a
bank or credit union.

3. An operating subsidiary if each
owner is wholly owned by the same bank or credit union.

C. An applicant for a student loan
servicer license must file a written application, as prescribed by the deputy
director, along with all of the following:

1. A nonrefundable license fee of
$1,000.

2. A nonrefundable investigation fee
of $800.

3. A notarized financial statement
that is prepared by a certified public accountant or public accountant, the
accuracy of which is attested to by someone who is authorized to execute the
document.

4. Any history of criminal
convictions of the applicant and each partner, member, officer, director and
principal employee of the applicant.

D. The deputy director may conduct a
state and federal criminal history records check of the applicant and each
partner, member, officer, director and principal employee of the
applicant. On request by the deputy director, the applicant or the
partner, member, officer, director or principal employee of the applicant shall
submit a full set of fingerprints to the department of insurance and financial
institutions for the purpose of obtaining a state and federal criminal records
check pursuant to section 41-1750 and public law 92-544. The
department of public safety may exchange this fingerprint data with the federal
bureau of investigation.

E. The deputy director, on receipt of
the application and fees, must also investigate the applicant's financial
condition and responsibility, financial and business experience and character
and general fitness.

F. The deputy director may deny a
student loan servicer license if the deputy director determines any of the
following:

1. The applicant's financial
condition is not sound.

2. The business will not be conducted
honestly, fairly, equitably, carefully, efficiently, consistent with the
purposes of this chapter and in a manner commanding the community's confidence
and trust.

3. The applicant and the applicant's
control persons are not qualified or not of good character.

4. Someone on behalf of the applicant
has knowingly made a material misstatement or omission in the application.

5. The applicant does not meet other
requirements as determined by the deputy director.
END_STATUTE

START_STATUTE
6-1804.

License expiration; surrender; renewal; suspension; information
update; abandonment

A. A student loan servicer license
expires at the close of business on September 30 of the odd-numbered year
immediately following its issuance, unless it is renewed, surrendered,
suspended or revoked.

B. Within fifteen days after a
licensee stops engaging in student loan servicing at a location in this state,
the licensee must surrender its license for that location and notify the deputy
director in writing.� The written notice shall identify the location where the
licensee's records will be stored and the name, address and telephone number of
an individual who is authorized to provide access to the records. A
license surrender does not reduce or eliminate the licensee's civil or criminal
liability arising from acts or omissions occurring before the surrender.

C. A student loan servicer license
may be renewed once every two years. The renewal application must be
filed by September 1 of the year in which the license expires and must be
accompanied by all documents and fees that are required for the initial
licensure. Any renewal application filed after that date must include a
late fee of $100.

D. If a licensee files a license
renewal application on or before the license expiration date, the license
remains effective until the deputy director issues the renewal or notifies the
licensee in writing of the deputy director's refusal to renew the license,
including the grounds for the refusal to renew.� Grounds for refusal to renew
are the same as grounds to deny an initial application pursuant to section 6-1803.

E. The deputy director must
automatically suspend the initial or renewal license if payment of the required
fees is returned or not accepted by the bank. The deputy director
must give the licensee notice of the automatic suspension, pending proceedings
for revocation or refusal to renew, and an opportunity for a hearing.

F. An applicant or licensee must
notify the deputy director in writing of any change in the information provided
in the applicant's or licensee's initial license application or most recent
license renewal application within ten business days after the information
changes.

G. The deputy director may consider
an application abandoned if the applicant fails to respond to any request for
information. The deputy director must notify the applicant in
writing that if the information is not submitted within sixty days after the
request date, the application will be deemed abandoned. Application
fees for abandoned applications are not refundable. The applicant
may submit a new application with the required filing fees.

END_STATUTE

START_STATUTE
6-1805.

Name and location

A student loan servicer must use the name and
business address stated in its license. The student loan servicer
must maintain one place of business under the license and notify the deputy
director in writing of any location change. The deputy director may
issue more than one license to a student loan servicer. A license is not
transferable or assignable.
END_STATUTE

START_STATUTE
6-1806.

Records retention

A. Except as provided in federal law,
a federal student education loan agreement or a contract between the federal
government and the student loan servicer, a student loan servicer shall
preserve records of each student education loan and all communications with
student loan borrowers for at least two years after the final payment on a
student education loan or the sale, assignment or other transfer of the
servicing of a student education loan, whichever occurs first, or a longer
period as may be required by any other law.

B. On the deputy director's request,
a student loan servicer must make the records available or send the records to
the deputy director within five business days after the request. The
deputy director may allow additional time if requested. The records
must be sent by certified mail, return receipt requested, or any express
delivery carrier that provides a dated delivery receipt.
END_STATUTE

START_STATUTE
6-1807.

Federal law compliance

A student loan servicer must comply with all
applicable federal laws, including the Truth in Lending Act as defined in
section 6-601. A violation of applicable federal law is a violation
of this section.� The deputy director may take enforcement action against any
violator, in addition to any other legal remedies.
END_STATUTE

START_STATUTE
6-1808.

Prohibited practices

A student loan servicer may not:

1. Employ, directly or indirectly,
any scheme, device or artifice to defraud or mislead student loan borrowers.

2. Engage in any unfair or deceptive
practice toward any person or misrepresent or omit any material information in
connection with the servicing of a student education loan, including any fees,
payments due, student education loan terms or student loan borrower
obligations.

3. Obtain property by fraud or
misrepresentation.

4. Misapply or recklessly apply
student education loan payments to a student education loan's outstanding
balance.

5. Provide inaccurate information to
a credit bureau that may cause harm to a student loan borrower's
creditworthiness.

6. Fail to report both the favorable
and unfavorable payment history of the student loan borrower to a nationally
recognized consumer credit bureau at least annually if the student loan
servicer regularly reports information to a credit bureau.

7. Refuse to communicate with an
authorized representative of the student loan borrower who provides a written
authorization signed by the student loan borrower.

8. Make any false statement or omit a
material fact in connection with any information or reports filed with a
government agency or in connection with any investigation that is conducted by
the deputy director or another government agency.

9. Communicate with student loan
borrowers in any manner designed to harass or intimidate.
END_STATUTE

START_STATUTE
6-1809.

Student loan servicer
responsibilities

Except as otherwise provided in federal law, a
federal student education loan agreement or a contract between the federal
government and the student loan servicer:

1. If a student loan servicer
regularly reports information to a consumer reporting agency, the student loan
servicer shall accurately report a student loan borrower's payment performance
to at least one consumer reporting agency that compiles and maintains files on
consumers on a nationwide basis as defined in 15 United States Code section
1681
a
, on acceptance as a data furnisher by that consumer
reporting agency.

2. A student loan servicer shall
inquire of a student loan borrower how to apply the student loan borrower's
nonconforming payment. A student loan borrower's direction on how to
apply a nonconforming payment remains in effect for any future nonconforming
payment during the term of a student education loan until the student loan
borrower provides different directions.� For purposes of this paragraph,
"nonconforming payment" means a payment that is either more or less
than the student loan borrower's required student education loan payment.

3. If the sale, assignment or other
transfer of the servicing of a student education loan results in a change in
the identity of the person to whom the student loan borrower is required to
send subsequent payments or direct any communications concerning the student
education loan, a student loan servicer, within forty-five days after the sale,
assignment or other transfer, shall transfer all information regarding the
student loan borrower, the student loan borrower's account and the student loan
borrower's student education loan, including the student loan borrower's
repayment status and any student loan borrower benefits associated with the
student loan borrower's student education loan, to the new student loan
servicer who is servicing the student loan borrower's student education loan.

4. A student loan servicer shall
adopt policies to verify that the student loan servicer has received all
information regarding a student loan borrower, the student loan borrower's
account and the student education loan borrower's student education loan,
including the student loan borrower's repayment status and any student loan
borrower benefits associated with the student loan borrower's student education
loan when the student loan servicer obtains the right to service the student
education loan.

5. If a student loan servicer sells,
assigns or otherwise transfers the servicing of a student education loan to a
new student loan servicer, the sale, assignment or other transfer shall be
completed at least seven days before the student loan borrower's next payment
is due.

6. A student loan servicer that
sells, assigns or otherwise transfers the servicing of a student education loan
shall require as a condition of the sale, assignment or other transfer that the
new student loan servicer honor all student loan borrower benefits originally
represented as being available to a student loan borrower during the repayment
of the student education loan and the possibility of those benefits, including
any benefits that were represented as being available but for which the student
loan borrower has not yet qualified.

7. A student loan servicer that
obtains the right to service a student education loan shall honor all student
loan borrower benefits originally represented as being available to a student
loan borrower during the repayment of the student education loan and the
possibility of those benefits, including any benefits that were represented as
being available but for which the student loan borrower has not yet qualified.

8. A student loan servicer shall
respond within thirty days after receiving a written inquiry from a student
loan borrower or a student loan borrower's authorized representative.
END_STATUTE

START_STATUTE
6-1810.

Oversight and authority

A. In considering and investigating
an application under this chapter, the department may use all appropriate means
of investigation and discovery that are available pursuant to this title.

B. The deputy director shall control
access to any documents and records of the student loan servicer or person
under examination or investigation and take possession of the documents and
records or place a person in exclusive charge of the documents and records in
the place where the documents and records are usually kept.� Removing or
attempting to remove any of the documents and records during the control period
is prohibited, except by court order or with the deputy director's consent. The
student loan servicer or owner of the documents and records must have access to
the documents and records as needed to conduct its ordinary business, unless
the deputy director has reason to believe there is a risk that the documents or
records will be altered or destroyed to conceal a violation.

C. A student loan servicer or person
subject to investigation or examination under this chapter may not knowingly
withhold, abstract, remove, mutilate, destroy or hide any books, records,
computer records or other information.
END_STATUTE

START_STATUTE
6-1811.

Notice; hearing; violation;
penalties

A. After notice and an opportunity
for a hearing, the deputy director shall suspend, revoke or refuse to renew any
student loan servicer license, or take any other action, for any violation or
any reason that would be sufficient grounds for denial of a license
application. If the license is surrendered, revoked or suspended
before it expires, the deputy director may not refund any portion of the
license fee.

B. The deputy director may take any
action allowed under this title if the deputy director determines that a person
violated, is violating or is about to violate this chapter or a student loan
servicer or any owner, director, officer, member, partner, shareholder,
trustee, employee or agent of the student loan servicer has committed fraud,
engaged in dishonest activities or made any misrepresentation.
END_STATUTE

START_STATUTE
6-1812.

Violation; unlawful practice;
civil penalty

A. An act or practice in violation of
this chapter is an unlawful practice under section 44-1522 and
subject to enforcement through private action and prosecution by the attorney
general. The attorney general may investigate and take appropriate
action as prescribed by Title 44, chapter 10, article 7.

B. A person who violates this chapter
is subject to a civil penalty of up to $100,000 per violation and an order to
make restitution.
END_STATUTE

START_STATUTE
6-1813.

Noncompliance; damages;
attorney fees

A. A student loan servicer that
wilfully fails to comply with this chapter with respect to any student loan
borrower is liable to that student loan borrower in an amount equal to the sum
of all of the following:

1. Any actual damages sustained by
the student loan borrower as a result of the failure.

2. A monetary award equal to three
times the total amount collected from the student loan borrower, as ordered by
the deputy director.

3. An amount of punitive damages as
determined by the court.

4. In the case of any successful
action to enforce any liability under this section, the costs of the action
together with reasonable attorney fees as determined by the court.

B. A student loan servicer that is
negligent in failing to comply with any requirement imposed under this chapter
with respect to any student loan borrower is liable to that student loan
borrower in an amount equal to the sum of both of the following:

1. Any actual damages sustained by
the student loan borrower as a result of the failure.

2. In the case of a successful action
to enforce any liability under this section, the cost of the action together
with reasonable attorney fees as determined by the court.
END_STATUTE

Sec. 2.
Requirements for enactment; two-thirds vote

Pursuant to article IX, section 22,
Constitution of Arizona, this act is effective only on the affirmative vote of
at least two-thirds of the members of each house of the legislature and is
effective immediately on the signature of the governor or, if the governor
vetoes this act, on the subsequent affirmative vote of at least three-fourths
of the members of each house of the legislature.