Attorney General Cuomo, Senate Majority Leader Joseph Bruno And Assembly Speaker Sheldon Silver Announce Bill To Protect College-bound Students From Deceptive Practices
ALBANY, NY (April 16, 2007) - Attorney General Andrew M. Cuomo, Senate Majority Leader Joseph L. Bruno and Assembly Speaker Sheldon Silver today announced the introduction of landmark legislation to protect students and their families from exploitation by conflicts of interest in the student-loan industry. The bill makes New York the first state to offer a solution to the student-loan scandal that has affected millions.
The Student Lending Accountability, Transparency and Enforcement (SLATE) Act of 2007, introduced by the legislative leaders at the request of Attorney General Cuomo, will address problems exposed as a result of the Attorney General's ongoing investigation into the widespread conflicts of interest throughout the $85 billion-per-year student loan industry. The measure codifies Cuomo's College Loan Code of Conduct, which is the basis for case settlements with the lenders and schools across the country.
Attorney General Cuomo said, "I am proud to stand with the leaders of the Legislature as New York leads the nation in passing the first state legislation to deal with the crisis of student loans. New York has a proud legacy of progressive legislative firsts and this act affirms that tradition. I also believe this will give students confidence in New York schools as they set a standard of lending integrity."
Senate Majority Leader Joseph L. Bruno said, "Recent disclosures of deceptive practices in the college loan industry are a serious problem affecting millions of college-bound students The legislation that we are introducing today will protect parents and students from financial exploitation, provide more transparency and accountability in the student loan industry, and give our families piece of mind in knowing that their hard-earned dollars are being used to provide a first-rate education for our children."
Assembly Speaker Sheldon S. Silver said, "It is deeply troubling that college and university financial aid officers and lenders would look to benefit from the need and willingness of working families and students to take on enormous debt to gain the education needed to compete in the 21st Century economy. The Assembly will hold a public hearing April 23 on the SLATE legislation as part of our efforts to move aggressively to end this scandal and restore confidence in our higher-education system."
Last month, Attorney General Cuomo announced he was investigating over 100 schools and more than six lenders for deceptive and sometimes illegal practices within the loan industry. Legal action has been initiated against San Francisco-based Education Finance Partners. In the recent weeks, several settlements have been announced with lenders and colleges, and many schools have agreed to adopt the Attorney General's College Lending Code of Conduct, which details guidelines/prohibitions of:
- Revenue sharing (where lenders provide "kickbacks" to colleges based on the number and amount of loans steered their way)
- Gift and trip prohibitions
- Advisory board compensation rules
- "Preferred lender" guidelines and disclosures
- Loan resale disclosures
- Call-center prohibitions
U.S. Senator Edward M. Kennedy said, "I applaud the introduction today of a bill in the New York State Legislature, written by Attorney General Cuomo, that would fight corruption and back-room dealing in the student loan industry in New York state. The United States Congress should follow suit by passing legislation that protects borrowers nationwide. I will continue to pursue the Student Loan Sunshine Act that I introduced in February, which protects all student borrowers by requiring transparency and prohibiting payments that create conflicts of interest. Our students deserve nothing less than vigorous oversight and complete transparency in an industry that so directly affects their futures."
Rep. George Miller (D-CA), Chairman of the House Education and Labor Committee said, "Attorney General Cuomo and New York state leaders have done the right thing for New York's students today by introducing legislation to ensure that schools abide by the highest ethical standards while working with student lenders. As the Congress works to prevent future unethical practices in the student loan industry, we must extend these protections to students across the country, so they can be assured that their college financial aid officers are acting in their best interests."
The Student Lending, Accountability, Transparency and Enforcement Act:
- Prohibits lenders from making gifts - including the practice of revenue sharing - to colleges and universities or their employees in exchange for any advantage in loan activities
- Bans colleges and universities from soliciting, accepting or receiving any gifts whatsoever - including those construed as part of a revenue sharing practice - from lenders in exchange for advantageous loan consideration
- Bars college and university employees from receiving any advantage, reimbursement or benefit from serving as a member of a lender's advisory board
- Prohibits lender employees and agents from posing as college or university employees, including staffing the school's financial aid offices with lender employees
- Bans lenders and schools from agreeing to certain quid-pro-quo high-risk loans that prejudice other borrowers or potential borrowers
- Prohibits schools from linking or directing potential borrowers to any electronic master promissory notes or other loan agreements that do not allow students to enter a lender code or name for any lender offering the relevant loan at that guarantee agency
Furthermore, the law dictates strict criteria that schools continuing to use "preferred lender" practices must abide by.
Sen. Kenneth P. LaValle, Chairman of the Senate Higher Education Committee, said, "I am partnering with Attorney General Cuomo to protect vulnerable young students from those who would abuse a trusted relationship in the interest of making a profit. I will be introducing legislation that will keep students from being exploited by colleges, lenders, and third party entities when taking on financial debt they will most likely carry for many, many years. Students and parents have faith in the expertise and guidance offered by higher education lending and learning institutions. This relationship must be protected and students must be ensured that they are not steered into agreements that generate excessive debt, while lining the pockets of greedy individuals."
Assemblywoman Deborah J. Glick, Chair of the Assembly Higher Education Committee, said, "It is vitally important that students and their families have confidence that student loan practices at their university or college of choice are in their best interest. The state needs to outlaw these predatory practices and take a look at making higher education more affordable to the families of this state."
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