Student Loan Servicing (SLS) Act Requirements

Entities that perform the following activities are required to get a license.

Subject to limited exclusions, the Act prohibits a person from engaging in the business of servicing a student loan in this state without a license. The act of servicing includes any of the following activities related to a student loan:

  • (1)  Performing both of the following:
    • (A)  Receiving any scheduled periodic payments from a borrower or any notification that a borrower made a scheduled periodic payment.
    • (B)  Applying payments to a borrower’s account pursuant to the terms of the student loan or the contract governing the servicing.
  • (2)  During a period when no payment is required on a student loan, performing both of the following:
    • (A)  Maintaining account records for the student loan.
    • (B)  Communicating with the borrower regarding the student loan on behalf of the owner of the student loan promissory note.
  • (3)  Interacting with a borrower related to that borrower’s student loan, with the goal of helping the borrower avoid default on his or her student loan or facilitating the activities described in paragraph 1 or 2.

Who is excluded from licensing requirements?

The following are excluded from licensing requirements:

  • A bank, trust company, or industrial loan company authorized to transact business in this state.
  • A federally chartered savings and loan association, federal savings bank, or federal credit union that is authorized to transact business in this state.
  • A savings and loan association, savings bank, or credit union that is authorized to transact business in this state.
  • A public postsecondary educational institution or a private nonprofit postsecondary educational institution servicing a student loan it extended to the borrower.
  • A nonprofit community service organization that meets all the criteria of Financial Code Section 12104.
  • In connection with its responsibilities as a guaranty agency engaged in default aversion, a state or nonprofit private institution or organization having an agreement with the United States Secretary of Education under Section 428(b) of the Higher Education Act of 1965 (20 U.S.C. Sec. 1078(b)).
  • A “student loan servicer” does not include a debt collector, as defined in Section 1788.2 of the Civil Code, whose student loan debt collection business, and business operations, involve collecting, or attempting to collect, on defaulted student loans, that is, federal student loans for which no payment has been received for 270 days or more, or private student loans, in default, according to the terms of the loan documents. Debt collectors who also service nondefaulted student loans, as part of their business, and business operations, are “student loan servicers.”

Which student loan activities are covered?

A “borrower” means either a person who has received or agreed to pay a student loan, or a person who shares responsibility for repaying the loan. Covered servicing includes activity that originated in California and is directed to persons in or outside of California, or originated outside of California and is directed to persons inside California.  Information about the number of borrowers and the volume of loans serviced will be required during the initial licensing process, and annually thereafter.

What are the additional licensing requirements?

Net Worth Requirements
Audited financial statements prepared in accordance with Generally Accepted Accounting Principles that indicate a net worth of at least $250,000 must be submitted at the time of application. Licensees must continuously maintain a minimum net worth of $250,000.

Surety Bond Requirements
SLS licensees must maintain a surety bond payable to the commissioner and issued by an insurer authorized to do business in this state. The bond amount is based on the dollar amount of servicing activities conducted by the licensee in the preceding calendar year, as follows:

Dollar Amount of Loans Serviced Bond Amount
0-$50,000,000 $25,000
$50,000,001 – $100,000,000 $50,000
$100,000,001 – $250,000,000 $75,000
Over $250,000,000 $100,000

For licensees with multiple licensed locations, only one surety bond is required.

Supplemental Borrower Information
Information on borrower activity, as described in the Covered Student Loan Borrowers section, is required as part of the Company Checklist in NMLS (MU1 Form). Information should be submitted using the Supplemental Request for Information DFPI–SLS 100 form. This form is not submitted through NMLS, but must be submitted through secure email at .

What are the requirements after a Student Loan Servicer License has been issued?

Annual Reporting Requirements
A licensee shall file an annual report with the Commissioner, on or before March 15, giving the relevant information that the Commissioner reasonably requires concerning the business and operations conducted by the licensee in the state during the preceding calendar year. The form will be available within the DFPI Self Service portal at least 90 days before the due date.

Annual Assessment
On or before September 30 each year, the Commissioner shall notify each licensee of the amount assessed and payable by the licensee. The assessment is due and payable through the NMLS system by October 31. A licensee shall be assessed a minimum of $250 per licensed location, plus a pro rata share of the cost and expenses, as estimated by the Commissioner, for the ensuing year, and any deficit incurred or estimated in the year in which the assessment is made. All new licensees will need to provide information about borrower activity volume as of December 31 of the preceding year, for the current year’s assessment.

Audited Financial Statements  
All licensees must submit audited financial statements within 105 days of the end of their fiscal year. The report filed with the Commissioner shall be certified by the independent certified public accountant who conducted the audit. The audited financial statements must document that the licensee maintains a tangible net worth of $250,000. The audited financial statements must be uploaded through the NMLS system.

Last updated: Aug 3, 2021 @ 9:46 am

Approved by Mary Audick 1/2020