Public Law Ch. 357 FAQ

The Maine legislature recently enacted LD 1645, “An Act to Establish Protections for Private Student Loan Borrowers and a Registry of Lenders,” into law as PL 2021, Ch. 357. The law takes effect October 18, 2021. The law adds two articles to Maine’s Consumer Credit Code (Title 9-A of the Maine Revised Statutes); namely, Article 15 (“Private Student Lender Registry”) and Article 16 (“Private Education Lending”).

Questions have arisen among financial services companies regarding the publicly-available “registry” required by the law, as well as the interplay between the new laws and existing laws regulating consumer lenders, supervised lenders, servicers and debt collectors. In these Frequently Asked Questions (FAQs), the Bureau of Consumer Credit Protection responds to inquiries staff has received regarding implementation of the law.

FAQ: Article 15 - Private Student Lender Registry +

    What companies are required to register under Article 15?

    Any “student financing company” must register if it is not otherwise exempt from the law.

    What’s the definition of “student financing company?”

    The phrase is defined as a company that makes or extends credit to a student for postsecondary education, or a holder of debt or obligation owed or incurred by a student to finance postsecondary education.

    What are the important qualifications and exemptions?

    Qualifications:

    • The law applies if the student is located in the State of Maine
    • The education being financed need not be provided in-person, but also includes education provided “by correspondence or by the Internet”

    Exemptions – The law does not apply:

    • To extensions of credit that are made, insured or guaranteed under the federal Higher Education Act of 1965; 20 USC, Ch. 28, Sub-ch. IV
    • If the financing includes a loan secured by real property or a dwelling
    • If the creditor is (as defined by state law) a supervisor financial organization, a financial institution holding company, a mutual holding company, or a wholly-owned subsidiary of any of those entities; or if the creditor is the Finance Authority of Maine.

    Does the law apply to federal banks or their subsidiaries?

    Yes, unless state jurisdiction, in the language of the state law, “is preempted by federal law.”

    Are schools, wherever located, that provide secondary education to students located in Maine, subject to this law?

    Yes, whether or not the schools are accredited as postsecondary educational institutions in this state, if they extend credit to students or cause the consumer to incur a debt, by contract or otherwise, unless they are otherwise specifically exempted, such as if the debt instruments are federally made, insured or guaranteed.

    What must a student financing company subject to the law, do to comply?

    The company must:

    • Register, including submitting a fee of $500 annually
    • For any students located in Maine whose educations have been financed by the student financing company, submit a list of all schools provided educations to those students, and the number of financing arrangement for each school
    • List the total number of financing transactions made to students residing in Maine
    • Disclose the default rate for students who have obtained financing transactions from the student financing company
    • Submit sample copies of all promissory notes, agreements contracts or other instruments used by the company to extend student financing.

    By what date must student financing companies register under the law?

    Initial registrations must be submitted on or before January 31, 2022, and on or before January 31 of each subsequent year. This date was selected because the law requires registrants to provide data “for the previous year,” meaning that registrations filed by January 31, 2022 will include information relating to educational financing transactions completed through the end of the previous calendar year (December 31, 2021). Pursuant to Article 16 (see Article 16 FAQs below), student financing companies (termed “private education lenders” in Article 16) will be required to become licensed as supervised lenders. Registration and reporting under this Article 15, therefore, will be accomplished at the same time as the “annual notification” and reporting of loan volume required of all consumer lenders pursuant to Article VI, Part 2.

    How will the registration process be completed?

    The bureau will offer an online registration process, which will be operational on January 1, 2022.

    Will the information submitted become public?

    Yes – under the law’s provisions, the bureau is required to list the information, or a summary of the information, on a publicly available website.

    Are there penalties for noncompliance?

    Yes – failure to comply is a Class E crime, subject to fines and other penalties. In addition, a student financing company is subject to a private right of action brought by any person harmed by noncompliance.

    How do I get included on an “interested parties” email list for further information and updates?

    Submit your name, organization or company, and email address here to be placed on the interested parties email list.


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FAQ: Article 16 - Private Education Lending +

    What entities are subject to Article 16?

    The law applies to “private education lenders,” which is defined as a company in the business of securing, making or extending any private student loan, or holding any private student loan. Although the words “lender” and “loan” are used, the law also encompasses “extensions of credit” including credit “provided by the educational institution that the student attends.”

    What companies or transactions are excluded from the law?

    The law does not apply:

    • To extensions of credit that are made, insured or guaranteed under the federal Higher Education Act of 1965; 20 USC, Ch. 28, Sub-ch. IV
    • If the financing includes a loan secured by real property or a dwelling
    • If the creditor is (as defined by state law) a supervisor financial organization, a financial institution holding company, a mutual holding company, or a wholly-owned subsidiary of any of those entities; or if the creditor is the Finance Authority of Maine.
    • To extensions of credit made by the covered educational institution if the term of credit is 90 days or less, or the credit is interest-free and is for one year or less.

    Does the law apply to federal banks or their subsidiaries?

    Yes, unless state jurisdiction, in the language of the state law, “is preempted by federal law.”

    Must private education lenders obtain a license from the Bureau of Consumer Credit Protection?

    Yes, private education lenders must obtain a supervised lender license pursuant to 9-A MRS § 2-301.

    What is the deadline for private education lenders to apply for and obtain a supervised lender license.

    The effective date of the new law is October 18, 2021. The law states that a company “may not engage in the business of securing, making or extending a private education loan, or holding a private education loan,” without having first obtained a supervised lender license. Therefore, private student lenders must obtain a supervised lender license if they intend to conduct activities subject to this Part after October 18, 2021. The application form for a 2-year non-mortgage supervised lender license is found here.

    Does the law contain new requirements for private education lenders who require cosigners on private student loans?

    Yes – the requirements are detailed in the new law, and we recommend reading them carefully. For example, the standards include:

    • Specific disclosures that must be made to the co-signer, including credit report information, how the cosigner can cure a default, and how cosigners become eligible for a “cosigner release.”
    • Requirement for the form and font size of the notice
    • The requirement for an annual disclosure of the terms and conditions of a cosigner release
    • Timeframes on approval or denial of a cosigner release request, and
    • Consecutive on-time payment standards that qualify a cosigner for a release.

    Does the new law require discharge of liability if the obligor or cosigner becomes disabled?

    Yes. The provisions are complex, requiring, for example, that both the primary borrower and the cosigner be released from liability if the primary borrower becomes permanently disabled, and if the cosigner alone becomes disabled, the cosigner must be released from liability.

    Must a private education lender disclose its alternative repayment options?

    Yes, any option must be disclosed on a publicly accessible website.

    Does the law contain provisions relating to civil collection of private education loans?

    Yes, the law contains a detailed 17-point list of items and documentation that must be provided to the court as part of any collection action.

    Are there penalties for noncompliance?

    Yes – failure to comply is a Class E crime, subject to fines and other penalties. In addition, a private education lender or collector is subject to a private right of action brought by any person harmed by noncompliance.

    Does the law contain “true lender” provisions?

    Yes, the law states that the law applies to the entity that, for example, holds the predominant economic interest in the private education loan.


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