New Iowa Law Protects Iowans with Student Loans
Stronger Regulations Protect Borrowers from Scammers Charging Fees for Promised, but Not Always Actual, Student Loan Assistance
June 30, 2020
Americans face more than $1.5 trillion in student loan debt, a repayment burden that frequently sends consumers who struggle to make student loan payments searching for assistance. Increasingly, predatory scammers are taking advantage of borrowers by promising student loan relief in exchange for a fee. Often, this takes the form of unsolicited calls, letters to borrowers or advertisements that include an 800 number borrowers can call.
Beginning July 1, such organizations headquartered in other states doing business in Iowa face stricter regulations and are subject to prosecution, thanks to new legislation signed into law by Gov. Kim Reynolds on June 18.
The new law does not impact Iowa-based consumer credit organizations, which were already subject to similar oversight.
So-called debt relief organizations located outside of Iowa have charged borrowers upfront fees for services that can be obtained without cost from the lender, loan servicer or governmental agencies. The damage is compounded when the organization fails to make adequate payments on the borrower's behalf, resulting in additional interest or penalties that affect borrowers' credit and total debt. In many cases, the student loan servicer may be blocked from contacting the consumer directly to help resolve issues.
As the designated nonprofit student loan provider in Iowa, Iowa Student Loan® supported passage of the legislation to counteract such practices. "Our customer service operation, Aspire Servicing CenterSM, works with borrowers who have gotten into serious difficulty when they engaged out-of-state and unscrupulous debt management organizations," said Steve McCullough, president and CEO of Iowa Student Loan. "Once these issues arise, it's extremely difficult for us to resolve them. The financial damage to the consumer is long-lasting and can be severe."
McCullough added, "We and our governor-appointed board members have advocated for this legislation to protect consumers. We are pleased to see it signed into law."
The new law, SF272, requires out-of-state firms who act as intermediaries between borrowers of education loans and lenders to register with the Iowa superintendent of banking to do business in the state. Under the legislation, such registered firms are prohibited from collecting upfront fees and from offering or receiving incentives, among other prohibitions. Consumer rights have been provided, including the right to cancel contracts with these organizations, and the Iowa attorney general will be able to prosecute firms for violating provisions of the law.
McCullough encouraged borrowers who face difficulty making their payments to work directly with their student loan provider for repayment help and to never pay a fee for such services. "We don't offer third parties any discounts or services that we would not offer to the borrower. Any available assistance can be determined, without charge, by contacting your loan servicer directly."
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Christopher Weishaar, Digital PR Specialist, (515) 273-7102, firstname.lastname@example.org