The act expands the existing "Colorado Student Loan Servicers Act", which applies only to persons who service student loans, by adding a new part 2 covering private lenders, creditors, and collection agencies (private education lenders) in connection with those student education loans that are not made, insured, or guaranteed under federal law and that are used for postsecondary education. The act:
- Requires private education lenders to register with an assistant attorney general;
- Requires private education lenders to grant a release to cosigners if certain conditions are met, including 12 months of consecutive, on-time payments, and to ensure that cosigners have access to all documentation and records related to the loan they have cosigned;
- Expands disability discharge requirements so that a borrower or cosigner may be released from repayment obligations if permanently disabled;
- Prohibits "robo-signing" of documents used in collection lawsuits and requires specific evidence of loan origination and chain of ownership of the debt before a loan creditor or collection agency may commence legal proceedings;
- Prohibits auto-defaults, in which a loan is declared immediately due and payable upon the death or bankruptcy of a cosigner even when there has been no default in payments; and
- Provides legal recourse for borrowers who are harmed by predatory acts and practices of a private education lender. A violation of the new part 2 is defined as a deceptive trade practice under the "Colorado Consumer Protection Act".
(Note: This summary applies to this bill as enacted.)