California DFPI Licenses First In …


The California Department of Financial Protection and Innovation (DFPI) has signed an agreement with New York-based Meratas Inc., a company that partners with educational institutions to offer students sharing agreements. income (ISA) to fund post-secondary education and training, according to a Press release of the DFPI.

The agreement reflects the ministry’s decision to treat these private finance products as student loans for the purposes of California Student Loans Service Act (SLSA), which was adopted in 2016.

“Today’s action shows that we are taking important steps to better protect California student borrowers,” said Suzanne Martindale, senior deputy commissioner of DFPI, whose consumer financial protection division oversees the law. student loan service. “Regulating revenue sharing agreements like student loans level the playing field and create a fair market that protects all consumers. “

The agreement between DFPI and Meratas is considered the first of its kind to require an ISA service to comply with state licensing and regulations. “Regulating an ISA server under SLSA better protects California students by ensuring that the company submits to regular exams and communicates honestly and fairly with borrowers, among other protections,” DFPI reports.

ISAs are increasingly used by private for-profit companies offering post-secondary education and training programs on a not-for-profit basis. Under an ISA, students agree to repay a school a set percentage of their future gross income after graduation, but only if they have a job and earn more than an agreed salary.

Meratas applied for a license in April, which led to an agreement that the DFPI will issue the company with a conditional license under the SLSA.

For years, some ISA issuers have argued that federal and state loan laws do not apply to agreements, and students who fund education under agreements do not have the same regulatory protections as other borrowers, according to the DFPI.

The DFPI expects to clarify the requirements for ISA providers and services through future regulations.

In addition to regulating student loan services, the DFPI authorizes and regulates financial products and services, debt collectors, credit repair and consumer credit reporting agencies, debt relief companies and Moreover.

Debt collection license applications are new in California under the Debt Collection Licensing Act passed last year. License applications will be online via the Nationwide multi-state licensing system and registry September 1st. Applications will be due by December 31, 2021 and mandatory from January 1, 2022, ACA International reported previously.

Meanwhile, at the federal level, the US Department of Education (DOE) has released updated information on the balance between federal and state oversight of student loan services.

“A new legal interpretation which revises and clarifies [the department’s] position on the legality of state laws and regulations governing various aspects of the federal student loan service… DOE press release.

In July, the Conference of State Bank Supervisors and the North American Collection Agencies Regulatory Association sent a letter to Education Secretary Miguel Cardona applauding recent steps taken by the DOE to recognizing state authority, but calling for more action to end preemption on state regulation, the ACA previously reported.

According to the DOE, “the proposed notice clarifies that while federal law takes precedence over state regulation in certain limited areas, states can regulate the service of student loans in many other ways without being preempted by the federal government. Higher education law (HE HAS).”

The interpretation notice went into effect on August 12, but the ministry is also seeking public comments on the notice until September 13 so they can identify any further changes that may be needed, according to a notice in the Federal Register.

Federal student loan payments are currently on hold until January 31, 2022. The extension was recently updated to take effect next year and on DOE Reports this is the definitive extension of the abstention from payment.

State regulators who called for the cancellation of the preemption policy said it was important to do so now to ensure borrower protection once payments resumed.

To file comments using case ID ED-2021-OS-0107:

  • Go to submit your comments electronically. Usage Information, including instructions for accessing agency documents, submitting comments and viewing the dossier, is available on the website under the heading Faq.
  • Postal mail, commercial delivery or hand delivery: If you send or deliver comments on the interpretation, please direct them to Beth Grebeldinger, US Department of Education, Federal Student Aid, 830 First Street NE, Room 113F4, Washington, DC 20202.

For more information on how the ACA licensing staff can help you complete your license applications, please contact us at [email protected] or call (952) 926-6547.


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