California Passes AB 376, Becomes First State to Provide a Bill of Rights for Student Borrowers

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Rich Pedroncelli | AP | Bloomberg via Getty Images

By Stacy Hernandez 

Governor Gavin Newsom signed Assembly Bill (AB) 376 on Friday, making California the first state to provide its student borrowers with a Bill of Rights.

The bill was first approved by the California State Assembly and was afterward approved by the State Senate in August.

AB 376 is designed to provide student borrowers with protections against predatory lenders and servicers.

Suzanne Martindale, senior policy council and legislative manager for Western states at Consumer Reports, has previously commended the new bill of rights. 

“[AB 376] will protect Californians from predatory loan servicing practices and help ensure they stand a fair shot at putting those debts behind them,” she said.

The bill also serves to enforce statewide standards, which would ban lenders from manipulative practices. Additionally, borrowers would have the option of filing complaints against debt collectors. 

Federal student loan servicing companies have been investigated in the past for failing to notify borrowers of available repayment options. Doing so can cause borrowers to default on their loans and thus suffer from consequences such as credit damage.

Under this new legislation, loan industry employees will be required to undergo special customer service training. The aim of this is to demand more transparency from lenders. 

“For years, thousands of California student loan borrowers told us about problems with student loan companies,” said Natalia Abrams, Director of Student Debt Crisis. “These problems that have cheated people out of millions of dollars and caused real stress for families who had no recourse.”

“Now, with the Student Borrower Bill of Rights, Californians have real, enforceable rights and can take action when they are harmed.”

 Another noteworthy feature of AB 376 is that it creates a Student Borrower Ombudsman’s Office, which would advocate on behalf of borrowers during disputes with lenders.

 The Student Borrower Ombudsman’s Office also creates protections for groups such as disabled people, nurses and teachers.

 Kristin McGuire, Western Region Director at Young Invincibles, praised Newsom for passing the bill.

“Today is a huge victory for student borrowers,” she said. “We know that overwhelming student debt disproportionately impacts Black, Latinx, and first-generation college students.”

Newsom has previously expressed his support for borrowers. During a press conference held earlier this year, he noted that borrowers were having an especially difficult time paying their loans during the pandemic.

 Pandemic related financial impacts negatively affected countless borrowers. Last month, more than 500 thousand borrowers defaulted on their student loans, totaling about $14 billion in unpaid debt.

 “A lot of those [CARES Act] checks, if you had debt, were garnished by debt collectors,” Newsom said.

 “We just signed, I just signed an executive order quite literally moments ago where that no longer will be the case. The executive order denies the ability for debt collectors to garnish your CARES Act dollars.”

 Newsom also made this legislation retroactive, meaning that debt collectors who had already taken borrowers’ CARES checks had to return the money immediately.

 There are currently four million Californians who have taken out loans to pay for their education. Their combined debt is roughly $147 billion.

 Although AB 376 does not eliminate Californians’ student debt, it is a step in the right direction to provide borrowers with the resources necessary to defend themselves against the predatory loan industry.

Seed: Actually, my concern is the future sustainability of Davis and creating a community that allows people of color, families and children to be able to live and enjoy. Availability of housing is one means toward that end, but so too are the availability of high caliber jobs that are not directly tied to the university and city finances which provide us the ability to maintain infrastructure, roads, parks, etc.

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