AB 376 Requires New Student Loan Ombudsman to Refer Relevant Complaints to Bureau of Private Postsecondary Education


By Madison Beck

AB 376 (Stone), as amended August 20, 2020, adds Title 1.6C.10 (commencing with section 1788.100) to the Civil Code, and amends and repeals various sections of the Financial Code to create a “Student Borrower Bill of Rights” and provide increased protection for students through increased requirements for loan servicers.

The bill includes legislative findings and declarations acknowledging that California faces a student debt crisis—citing more than 3.7 million borrowers owing nearly $125 billion in student debt; recognizing the significant impact this debt is having on all aspects of life, as well as exacerbating economic, gender, and racial inequality; and finding that the $1.5 trillion student loan market is plagued with predatory practices.  Citing the federal government’s failure to take necessary action to halt widespread abuses, the bill expressly states that “it is now more important than ever to ensure that California student loan borrowers will be given meaningful access to federal affordable repayment options and loan forgiveness benefits, reliable information, and quality customer service and fair treatment.”

The bill authorizes the Department of Financial Protection and Innovation (DFPI) (formerly known as the Department of Business Oversight) to administer the new requirements for loan servicers.  As it relates to the Bureau of Private Postsecondary Education (BPPE), AB 376 adds section 1788.104 to the Civil Code to establish a California Student Loan Ombudsman position, responsible for receiving and reviewing complaints from student loan borrowers and directs the Ombudsman to refer all complaints regarding BPPE-licensed institutions to the BPPE Office of Student Assistance and Relief.

According to the bill’s author, AB 376 “will make California the first in the nation to offer student loan borrowers the same comprehensive protections that consumers with mortgages and credit cards take for granted.”

Governor Newsom signed AB 376 on September 25, 2020 (Chapter 154, Statutes of 2020). Pursuant to section 1788.104(j) and section 1788.105(f) of the Civil Code, the California Student Loan Ombudsman, and the DFPI Commissioner’s increased oversight over the student loan industry will become effective on July 1, 2021.


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