AB 866
Student loan servicing.
Vote required
Majority
Fiscal committee
No
Appropriation
No
Current location
Appropriations
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Sign in to take action- Introduced
- Passed Assembly
- Passed Senate
- To Governor
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Bill overview
This bill clarifies that student loan servicers are subject to the Unfair Competition Law (UCL) and the Rosenthal Fair Debt Collection Practices Act in California. Specifically, it designates student loans as debts covered by the Rosenthal Act and defines transactions resulting in student loans as consumer credit transactions under that same act. The bill also clarifies that no state reimbursement is required for local agencies or school districts due to the creation of a new crime.
Key provisions
- Designates student loans as debts subject to the Rosenthal Fair Debt Collection Practices Act.
- Defines transactions giving rise to student loans as consumer credit transactions under the Rosenthal Act.
- Specifies that student loan servicers are subject to the Unfair Competition Law.
- States that no state reimbursement is required for local agencies or school districts due to the bill's provisions.
Who is affected
- Student loan borrowers
- Student loan servicers
- Debt collectors
- Local agencies and school districts
Notable changes
- Expands the scope of the Rosenthal Fair Debt Collection Practices Act to include student loans.
- Adds a new section to the Financial Code regarding student loan servicers and their obligations under the UCL.
Fiscal impact
No reimbursement is required by this act for a specified reason.
Arguments in favor
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AB866:v99#DOCUMENT
Bill Start
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 866
| Introduced by Assembly Member Ortega |
| February 19, 2025 |
An act to add Section 28180.5 to the Financial Code, relating to business practices.
LEGISLATIVE COUNSEL'S DIGEST
AB 866, as introduced, Ortega. Student loan servicing.
Existing law, the Student Loan Servicing Act, prohibits a person from engaging in the business of servicing a student loan in California without first obtaining a license. Existing law commits the administration of these provisions to the Commissioner of Financial Protection and Innovation and grants the commissioner various powers in this regard, including the authority to conduct investigations of applicants and licensees.
Existing law, the Unfair Competition Law (UCL), makes various practices unlawful and makes a person who engages, has engaged, or proposes to engage in unfair competition liable for a civil penalty, as specified. Existing law authorizes actions for relief prosecuted under the UCL to be brought by certain public attorneys and requires the penalty collected from those actions to be paid to the treasurer of the county or city in which the judgment is entered, as specified.
This bill would specify that a student loan servicer under the Student Loan Servicing Act, is subject to the UCL.
Existing law, the Rosenthal Fair Debt Collection Practices Act, regulates the collection of consumer debts by debt collectors, as defined. Under existing law, a debt collector who violates the act is liable to a debtor for actual damages resulting from the violation, and is subject to additional civil penalties for any willful or knowing violation of the act, and other specified remedies. Existing law also makes certain violations of the act punishable as a crime.
The bill would specify that a student loan is a debt that is subject to the Rosenthal Fair Debt Collection Practices Act. The bill would further specify that a transaction giving rise to a student loan is a consumer credit transaction for purposes of the Rosenthal Fair Debt Collection Practices Act. By expanding the scope of an existing crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: YES
Bill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 28180.5 is added to the Financial Code, to read:
28180.5.
(a) A student loan servicer is a person for purposes of the Unfair Competition Law (Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 of the Business and Professions Code).
(b) A student loan is a debt for purposes of the Rosenthal Fair Debt Collection Practices Act (Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code).
(c) A transaction giving rise to a student loan is a consumer credit transaction for purposes of the Rosenthal Fair Debt Collection Practices Act (Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code).
SEC. 2.
No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.