N.Y. Comp. Codes R. & Regs. tit. 3 § 409.3

Current through Register Vol. 46, No. 43, October 23, 2024

Section 409.3 - Licensing

(a) License required.

(1) Except as provided in subdivisions (2) and (3), every person engaged in the business of servicing student loans owed must be licensed by the superintendent as a student loan servicer in accordance with this section.

(2) An exempt organization is not required to apply for or receive a license under this section to engage in the business of servicing student loans, provided that unless preempted by federal law such exempt organization notifies the superintendent that it is servicing student loans in this state. In the event that a student loan servicer ceases to be an exempt organization, that person may not service student loans without first being licensed by the superintendent as a student loan servicer in accordance with this section.

(3) A student loan servicer that services only federal student loans is not required to apply for or receive a license under this section to engage in the business of servicing student loans. In the event that a student loan servicer ceases to be a student loan servicer that services only federal student loans seeks to begin servicing student loans which are not federal student loans, that person may not service student loans other than federal student loans owed by one or more borrowers residing in this state without first being licensed by the superintendent as a student loan servicer in accordance with this section.

(4)

(i) A debt collector whose student loan debt collection business, and business operations, involve collecting, or attempting to collect, on a Direct Loan or FFELP Loan for which no payment has been received for 270 days or more, a Perkins Loan in default, or on a private student loan in default according to the terms of the loan documents shall not be required to obtain a license under paragraph (1) of this subdivision.

(ii) Notwithstanding subparagraph (i) of this paragraph any debt collector who services non-defaulted student loans, as part of their business, and business operations, shall be deemed to be engaged in the business of servicing student loans and shall be required to obtain a license pursuant to paragraph (1) of this subdivision.

(b) Use of NMLS.

(1) Every application for a license under this section shall be filed through NMLS.

(2) Every applicant shall make such application in accordance with the checklist and instructions of NMLS for transmission to the department.

(3) An applicant that files an application through the NMLS shall comply with all of the filing requirements imposed by the NMLS and the department including the payment of all fees required by the NMLS and by the department. Fees payable to the NMLS shall be the sole property of the NMLS and shall not be deemed revenue of the department.

(4) Any information or documentation required to be submitted in connection with an application that cannot be filed through NMLS shall be transmitted to the department in a form and manner as required by the superintendent.

(c) Initial Application.

(1) Every application for a license under this section shall include all information required by the NMLS checklist and instructions for the application, including:

(i) a description of the business operations of the applicant;

(ii) an affirmation of financial solvency noting such capitalization requirements as may be required by the superintendent, and access to such credit as may be required by the superintendent;

(iii) a financial statement prepared by a certified public accountant, the accuracy of which is sworn to under oath before a notary public by an officer or other representative of the applicant who is authorized to execute such documents;

(iv) an affirmation that the applicant, or its members, officers, partners, directors and principals as may be appropriate, are at least twenty-one years of age;

(v) information as to the character, fitness, financial and business responsibility, background and experiences of the applicant, or its members, officers, partners, directors and principals as may be appropriate including but not limited to an affirmation setting forth whether the applicant, or its members, officers, partners, directors and principals:

(a) has, within the last ten years prior to the date of application, committed any act involving dishonesty, fraud, deceit, or has been convicted of, or pleaded nolo contendere to, a crime directly related to the qualifications, functions, or duties related to servicing student loans, provided that any criminal conviction be evaluated consistent with article twenty-three-A of the correction law;

(b) has had a license or registration revoked by the superintendent or any other regulator or jurisdiction;

(c) has been an officer, director, partner, member or substantial stockholder of an entity which has had a license or registration revoked by the superintendent or any other regulator or jurisdiction; and

(d) has been an agent or employee of an entity which has had a license or registration revoked by the superintendent or any other regulator or jurisdiction and the nature of the agency or employment at the time of the revocation; and

(vi) any additional detail or information required by the superintendent.

(d) Investigation fee. No application shall be deemed submitted unless accompanied by a fee as prescribed pursuant to section 18-a of the banking law.

(e) Review of applications.

(1) Upon a complete application being submitted, the superintendent shall consider, in her sole discretion, whether the financial responsibility, experience, character, and general fitness of the applicant and, if applicable, the members, officers, partners, directors, and principals of the applicant are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently within the purpose of article 14-A of the banking law.

(2) If this review reveals that any matter requires, in the superintendent's judgment, the submission of additional information from the applicant, the applicant shall be so notified and shall submit such supplementation as may be required, in a manner directed by the superintendent. Failure to submit the information required by the superintendent within fifteen days after being notified of the need for supplementation, or such longer time as provided by the superintendent, shall be deemed a withdrawal of the application.

(3) If, after the application is submitted, but before the superintendent has made a determination thereon, any information in the application ceases to be true or correct, the applicant shall immediately file through NMLS an amendment correcting the information.

(4) Refusal to issue license.

(i) If, after consideration of the application, the superintendent, in her sole discretion, determines that the financial responsibility, experience, character, and general fitness of the applicant and, if applicable, the members, officers, partners, directors and principals of the applicant are not such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently, the superintendent shall refuse to issue the license.

(ii) Further, after consideration of the application, the superintendent may refuse to issue a license to any applicant if she finds that the applicant, or any person who is a director, officer, partner, agent, employee, member, or substantial stockholder of the applicant:

(a) within the last ten years prior to the date of application, has committed any act involving dishonesty, fraud, deceit, or has been convicted of, or pleaded nolo contendere to, a crime directly related to the qualifications, functions, or duties related to servicing student loans, provided that any criminal conviction be evaluated consistent with article twenty-three-A of the correction law;

(b) has had a license or registration revoked by the superintendent or any other regulator or jurisdiction;

(d) has been an agent, employee, officer, director, partner or member of an entity which has had a license or registration revoked by the superintendent where such person shall have been found by the superintendent to bear responsibility in connection with the revocation.

(iii) If the superintendent refuses to issue a license under this paragraph, the superintendent shall notify the applicant of such refusal.

(5) Issuance of a license.

(i) If after consideration of the application the superintendent, in her sole discretion, determines that the financial responsibility, experience, character, and general fitness of the applicant and, if applicable, the members, officers, partners, directors, and principals of the applicant are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently, and the superintendent determines that no other grounds to refuse to issue the license exist, the superintendent may cause the license to be issued.

(ii) Upon determining the license should be issued the superintendent shall cause the license to be transmitted in an electronic format to the applicant and shall cause a copy to be retained in the records of the department.

(iii) No application shall be considered approved until it is approved by the superintendent and the license is received by the applicant.

(f) Surrender of License.

(1) Any student loan servicer may surrender a license issued under this section by delivering to the superintendent written notice that it thereby surrenders such license, but such surrender shall not affect such student loan servicer's civil or criminal liability for acts committed prior to such surrender. Further, such surrender shall not affect the jurisdiction of the department or the courts of this state over acts committed prior to such surrender.

(2) If such surrender is made after the issuance by the superintendent of a statement of charges and notice of hearing, the superintendent may proceed against the student loan servicer as if such surrender had not taken place.

(3) A student loan servicer that surrenders its license shall remain responsible for paying assessments under section 206 of the financial services law for the year in which the surrender takes place.

(4) No surrender shall be effective during the conduct of an examination under this part without the consent of the superintendent upon such conditions as she may deem necessary and appropriate in her discretion.

(5) A student loan servicer that surrenders its license shall preserve books and records in accordance with section 409.13 of this part.

(g) Any license issued under this section shall continue in full force and effect until it is surrendered, revoked, or suspended.

(h) By filing an application under this section, a student loan servicer is deemed to have consented to the jurisdiction of the courts in this State and waives any defense to the contrary.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 409.3

Adopted New York State Register October 16, 2019/Volume XLI, Issue 42, eff. 10/16/2019