New legislation protects Iowans with student loan debt
WEST DES MOINES, Iowa (KCRG) - Gov. Reynolds signed into law new legislation on June 18 that protects Iowans with student loan debt.
Beginning on July 1, the new law will make organizations targeting Iowans subject to stricter regulations and prosecution. It does not impact Iowa-based consumer credit organizations, which were already subject to similar oversight.
Predatory scammers take advantage of borrowers by promising student loan relief in exchange for a fee over unsolicited calls, advertisements and letters. These so-called debt relief organizations, often located outside Iowa, charge borrowers upfront fees for services that can be obtained from the lender, loan servicer or government agencies without a fee.
Additionally, these organizations don’t make adequate payments on the borrower’s behalf, which results in more interest or penalties for the borrowers’ credit and total debt.
Under the new law, SF272, out-of-state firms are required to register with the Iowa superintendent of banking to do business in the state. And, among other prohibitions, these firms are not allowed to collect upfront fees, or offering or receiving incentives.
Consumers will have 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.
President and CEO of Iowa Student Loan Steve McCullough, who supported the legislation, said borrowers having difficulty making their payments should work directly with their student loan provider for repayment and never pay a fee for such services.
“Our customer service operation, Aspire Servicing Centers, works with borrowers who have gotten into serious difficulty when they engaged out-of-state and unscrupulous debt management organizations,” McCullough said. “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.”
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