Alston & Bird Consumer Finance Blog

Maine

Maine Enacts Law Protecting Victims of Economic Abuse

A&B Abstract:  An Act to Provide Relief to Survivors of Economic Abuse (the “Economic Abuse Law”), effective September 19, 2019, is aimed at preventing “economic abuse” by providing certain protections to victims of such abuse, in part, by imposing additional obligations on debt collectors and consumer reporting agencies (“CRAs”).  Debt collectors and CRAs should carefully review the Economic Abuse Law and determine whether updates to their policies, procedures and controls are necessary to ensure compliance with these additional protections.

What does the Economic Abuse Law do?

The Economic Abuse Law attempts to help victims of so-called “economic abuse” by (i) amending the Maine Fair Debt Collection Practices Act (“MFDCPA”) to provide certain protections from debt collection for survivors of economic abuse, (ii) amending the Maine Fair Credit Reporting Act (“MFCRA”) to require credit reporting agencies to remove from a consumer’s credit report any debt that is determined to be the result of economic abuse, and (iii) authorizing the courts to order compensation for losses resulting from economic abuse.

What is “economic abuse”?

Under the Economic Abuse Law, “economic abuse” means causing or attempting to cause an individual to be financially dependent by maintaining control over the individual’s financial resources.  The definition also includes the following non-exhaustive list of certain types of economic abuse:

  • unauthorized use of credit or property,
  • withholding access to money or credit cards,
  • forbidding attendance at school or employment,
  • stealing from or defrauding of money or assets,
  • exploiting the individual’s resources for personal gain of the defendant, or
  • withholding physical resources such as food, clothing, necessary medications or shelter.

See 19-A M.R.S. § 4002(3-B).  The Economic Abuse Law’s legislative history clarifies that the definition of “economic abuse” “is not intended to address identity theft, which is covered by the federal Fair Credit Reporting Act . . . Instead, the amendment includes, but is not limited to, the exploitative use of joint credit accounts without authorization by both joint owners and debt incurred through coercion.”

What protections does the Economic Abuse Law provide?

Additional Protections Under the MFDCPA

Under the existing provisions of the MFDCPA, if a consumer notifies a debt collector in writing within 30 days of receiving a debt validation notice, that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor, the debt collector must cease collection of the debt or any disputed portion of the debt, until the debt collector obtains verification of the debt or a copy of the judgment, or the name and address of the original creditor, and a copy of the verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.  32 M.R.S. § 11014(2).

The Economic Abuse Law amends the MFDCPA to also require that a debt collector cease collection of a debt or any disputed portion of a debt owed by a consumer subjected to economic abuse, “[i]f the consumer provides documentation to the debt collector as set forth in [14 M.R.S. § 6001(6)] that the debt or any portion of the debt is the result of economic abuse.”  Under 14 M.R.S. § 6001(6), acceptable documentation includes (1) a statement signed by a Maine-based sexual assault counselor, an advocate, or a victim witness advocate, (2) a statement signed by a health care provider, mental health care provider or law enforcement officer, or (3) a copy of a (i) protection from abuse (or harassment) complaint or a temporary order or final order of protection, (ii) police report prepared in response to an investigation of an incident of domestic violence, sexual assault or stalking, or (iii) criminal complaint, indictment or conviction for a domestic violence, sexual assault or stalking charge.

Unlike the existing protections discussed above, this new provision could be read to impose an absolute bar to the collection of debt resulting from economic abuse, as it is unclear whether there could be circumstances under which a debt collector may resume collection of such debt.  For example, one piece of acceptable documentation that a victim may provide under 14 M.R.S. § 6001(6) is a “copy of a protection from abuse complaint or a temporary or final order of protection.”  To the extent that a debt collector relies on a complaint or temporary order of protection that a court ultimately dismisses, it is unclear whether, and if so how, a debt collector could resume collection of such debt.

Additional Protections Under the MFCRA 

The MFCRA requires that, if a consumer disputes any item of information contained in a consumer’s credit report on the grounds that it is inaccurate and the dispute is directly conveyed to the consumer reporting agency (“CRA”) by the consumer, the CRA must reinvestigate and record the current status of the information within 21 calendar days of notification of the dispute, unless the dispute is frivolous.  10 M.R.S. § 1310-H(2).

The Economic Abuse Law would provide additional protections for victims of economic abuse.  Specifically, if a consumer provides documentation to a CRA as set forth in 14 M.R.S. § 6001(6) that the debt or any portion of the debt is the result of economic abuse, the CRA must reinvestigate the debt and, if it is determined that the debt is the result of economic abuse, the CRA must remove from the consumer’s credit report any reference to the debt or any portion of the debt determined to be the result of economic abuse.  10 M.R.S. § 1310-H(2-A).

Compensation for Victims of Economic Abuse 

In addition to the foregoing, the Economic Abuse Law also amends Maine’s Protection from Abuse Chapter to expressly empower the courts to provide monetary compensation to victims of economic abuse.  Specifically, courts are expressly authorized to “enter a finding of economic abuse” and “[o]rder payment of monetary relief to the plaintiff for losses suffered as a result of the defendant’s conduct.”  See 19-A M.R.S. § 4007(1).  The legislative history clarifies that the [Economic Abuse Law] does not add economic abuse as a type of conduct for which a protection from abuse order may be sought, although it does provide that if a protection from abuse order is issued, the court has expanded discretion to order appropriate monetary relief to help address the impact of any economic abuse that may be found by the court.”

Takeaway

As Maine regulators gear up to implement and enforce the additional protections provided by the Economic Abuse Law, debt collectors and CRAs should carefully review and update their policies, procedures and controls to ensure compliance with these additional protections.

Will Maine begin to regulate passive, secondary market investors in student loan debt?

A&B Abstract: 

Maine’s New Student Loan Bill of Rights requires the licensing of any person acting as “directly or indirectly” as a student loan servicer.  What might that mean for passive, secondary market investors in student loan debt?

Background

On June 20, 2019, Maine Governor Janet Mills signed into law LD 995, Maine’s “Student Loan Bill of Rights.” The legislative measure aims to protect student loan borrowers and imposes a new licensing obligation on “student loan servicer[s]” in the State of Maine.

Effective January 1, 2020, LD 995 adds a new Article 14 to Title 9-A of Maine Revised Statutes that, among other things:

  • Creates a student loan ombudsman with responsibilities that include reviewing and possibly resolving complaints from borrowers, analyzing borrower data, and helping borrowers understand rights and responsibilities; and
  • Provides that a person may not act as a student loan servicer, “directly or indirectly,” without first obtaining a license from the Maine Bureau of Consumer Credit Protection (the “Bureau”).

LD 995 bears certain similarities to other states’ efforts to regulate the student loan servicing industry and passive, secondary market investors in student loan debt, in particular Maryland’s SB 1068, which took effect on October 1, 2018. Although it appears that the Bureau has not yet released formal guidance regarding the applicability of LD 995’s licensing obligations to passive, secondary market investors in Maine student loan debt, the language of the new laws appears to be broad enough to allow the Bureau to regulate such persons upon a recommendation from the student loan ombudsman and raises the question of whether the Bureau will require such persons to be licensed or registered to engage in business.

Responsibilities of the Student Loan Ombudsman

Effective January 1, 2020, Maine Revised Statutes, title 9-A, section 14-104 requires the Superintendent of the Bureau to support, maintain, and designate a “student loan ombudsman” to provide timely assistance to student loan borrowers. In consultation with the Superintendent, the student loan ombudsman must:

  • Receive, review, and attempt to resolve complaints from student loan borrowers;
  • Compile and analyze data on such student loan borrower complaints;
  • Assist student loan borrowers to understand their rights and responsibilities under the terms of their student education loans;
  • Provide information to the public, agencies, Legislators and others regarding the problems and concerns of student loan borrowers and make recommendations for resolving those problems and concerns;
  • Analyze and monitor the development and implementation of federal, state, and local laws, ordinances, regulations, rules, and policies relating to student loan borrowers and recommend any necessary changes;
  • Review the complete student education loan history for a student loan borrower who provides written consent for such a review;
  • Disseminate information concerning the availability of the student loan ombudsman to assist student loan borrowers and potential student loan borrowers, public institutions of higher education, student loan servicers, and any other participants in student education loan lending with any student education loan servicing concerns;
  • Establish and maintain a student loan borrower education course within existing resources that includes educational presentations and materials regarding student loans; and
  • Take any other actions necessary to fulfill the duties of the student loan ombudsman as set forth in new Article 14.

Section 14-104 grants the student loan ombudsman broad authority to regulate Maine’s student loan industry, particularly with respect to those that service Maine student education loans. With respect to the bolded language above, it appears that the student loan ombudsman will have the ability to recommend changes to Maine’s regulation of passive, secondary market investors in Maine student loan debt, which is further supported by the new student loan servicer licensing requirements in Section 14-107.

Licensing of Student Loan Servicers

Section 14-103(4) defines the term “student loan servicer” to mean “a person, wherever located, responsible for the servicing of a student education loan to a student loan borrower,” and Section 14-103(1) defines the term “servicing” to mean:

(A) Receiving scheduled periodic payments from a student loan borrower pursuant to the terms of a student education loan;

(B) Applying the payments of principal and interest and such other payments with respect to the amounts received from a student loan borrower as may be required pursuant to the terms of a student education loan; and

(C) Performing other administrative services with respect to a student education loan.

Section 14-107 provides that “[a] person may not act as a student loan servicer, directly or indirectly, without first obtaining a license from the superintendent[,]” unless otherwise exempt. Importantly, this section provides that only “[a] licensed bank or credit union, a wholly owned subsidiary of such a bank or credit union and an operating subsidiary of such a bank or credit union as long as each owner of the operating subsidiary is wholly owned by that bank or credit union” is exempted from this licensing requirement.

For those readers tracking the development of state regulatory agencies’ policies on state licensing requirements applicable to entities that (1) invest in student loan debt (e.g., Maryland) or (2) invest in stand-alone mortgage servicing rights (“MSRs”), this language may raise some concerns. State legislators across the country have enacted laws containing broad language, similar to the language in LD 995, that gives state regulatory agencies the latitude to develop formal or informal policies to regulate passive, secondary market investors in those types of debt without the passage of new laws or regulations. Specifically, persons tracking such developments may be concerned by the fact that LD 995 provides that a “student loan servicer” includes a person “responsible” for the servicing of a student education loan, as that terminology could be read by the Bureau to include those entities that hold the servicing rights in Maine student education loans and contract with appropriately-licensed or exempt third-party subservicers to handle the servicing functions on the loans and borrower-facing interactions. Further, such persons also may be concerned that the licensing obligation extends to those “indirectly” acting as a student loan servicer, as many state regulatory agencies have used this specific verbiage to require entities that passively invest in MSRs to be licensed to engage in business, even if they do not directly service such MSRs or maintain any borrower contact.

Expectations for Future Regulation of Investors in Student Loan Debt

As noted above, neither the Bureau nor the Maine Legislature has released any formal determination as to whether this licensing requirement applies to passive, secondary market investors in student loan debt; however, as we watch other states’ legislative measures and regulatory policies unfold in the context of student loan debt and MSRs, it would not be surprising to see the Bureau or student loan ombudsman release such a determination.

We will continue to monitor the state’s efforts to regulate student loan servicers, particularly as they relate to passive, secondary market investors in Maine student loan debt, in the months to come.