The Student Loan Servicing Alliance, a trade group representing companies who collect education debt payments, sued the District on Tuesday over its requirement that servicers disclose information about their activities and obtain a license to operate within its borders.
“This law hurts borrowers more than it helps,” said Winfield P. Crigler, executive director of the alliance. “Adding state requirements that differ from one another on top of already stringent federal guidelines violates federal preemption and creates additional unnecessary layers of complexity.”
The District, California, Connecticut and Illinois have used licensing to bring federal student loan servicers under their regulatory purview. Their local agencies have the authority to monitor loan servicers’ compliance with federal laws, investigate their behavior and refer cases to the state attorney general.
Each has established a borrower’s bill of rights with minimum standards for timely payment processing, correction of errors and communication. The measures require companies to produce periodic information on their business activities that could be used to identify breakdowns in servicing. More than 15 states have servicing regulations in place or under consideration.
