Chairman Miller Statement on NYAG Cuomo’s New Code of Conduct for Student Lenders

Tuesday, December 11, 2007

WASHINGTON, DC -- U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, issued the following statement today in response to New York Attorney General Andrew Cuomo’s announcement of a new code of conduct for private student lenders who engage in direct-to-consumer marketing.

“I am very glad that Attorney General Cuomo is continuing to hold lenders accountable for practices that could deceive students and families. For far too long, lenders have used misleading and even predatory lending tactics to woo students into financially risky loans. This code of conduct builds on our efforts to restore trust in our nation’s student aid programs, and is similar to legislation recently passed by our Committee that would provide new safeguards and disclosures for students who borrow private loans – which tend to be more expensive for students and more profitable for lenders. Consumers clearly need and deserve better protections when navigating the often murky world of student loans, and we intend to enact our reforms into law in the coming months.”

Under the College Opportunity and Affordability Act (H.R. 4137), which was unanimously approved by the Education and Labor Committee in November and is expected to be considered by the House early next year, private student loan companies would be required to:

• Provide borrowers with detailed information on interest rates, finance charges, late fees and penalties;
• Inform borrowers of the maximum monthly payment allowed under terms of the loan;
• Provide borrowers with estimates of the total cost of private educational loans over the life of the loan;
• Inform borrowers of their potential eligibility for federal student loans; the interest rates on federal student loans; and where borrowers can obtain information about federal student loans; and
• Require lenders to obtain a written acknowledgement from a borrower that the borrower has read and understood these required disclosures.

In addition, the bill would prevent lenders from penalizing students for paying off their loans early; would prohibit co-branding; and would require lenders to notify schools of a proposed private loan of $1,000 or more, allowing financial aid officers an opportunity to ensure borrowers have exhausted their lower-cost federal student loan options. The Student Loan Sunshine Act, which is also included in this legislation, and was first passed by the House in May, includes protections for students against aggressive marketing practices by lenders who offer both federal and private student loans.

As part of the Committee’s ongoing investigation into the student loan industry, Miller asked the Federal Trade Commission to investigate student loan marketing practices; that probe is currently underway.

For more information on the College Opportunity and Affordability Act, click here; for more information on the Student Loan Sunshine Act, click here.

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FOR IMMEDIATE RELEASE
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