NY: Advocacy Letter to New York State Department of Financial Services on Regulatory Guidance or Adjustments to their Licensing Fee Structure

Mr. Scott Ahrens
Student Advocate & Assistant Deputy Superintendent
Student Loan Servicing
New York State Department of Financial Services
One State Street
New York, New York 10004

Mr. Ahrens:

We write to request that the New York State Department of Financial Services (NYDFS or Department) consider issuing regulatory guidance or adjustments to the licensing fee structure that will provide further clarity as to how student loan servicing licensing fees are calculated on an annual basis. More specifically, we request the Department consider adjustments to the licensing structure to recognize the existence of sub-servicers and assess fees in certain situations based on loans actually serviced rather than loans where a company may simply be a master servicer and not the actual servicer.

American Fintech Council (AFC) and its Mission

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by supporting the responsible growth of lending, fostering innovation in financial technology (Fintech), and encouraging sound public policy. We believe that the provision of well-regulated, responsible services and products by technology-driven financial service providers is critically important for the financial health of consumers, small businesses, and the banking system as a whole. AFC and its members support a fair financial services system where products are designed in compliance with regulations and where predatory conduct has no place.

Supervisory Licensing Fees

Our members are lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable products. A number of our members proudly operate in the State of New York. We understand that licensing fees are typically used to fund the activities of the licensing authority or regulatory body responsible for ensuring that licensed professionals meet certain standards and qualifications. Licensing fees often cover the administrative costs involved in reviewing and processing license applications, which can include tasks like verifying credentials, conducting background checks, and evaluating qualifications. We also understand that licensing fees can vary significantly depending on the profession, jurisdiction, and specific services provided by the licensing authority.

Licensing for student loan servicing companies is relatively new and we commend you and the Department for implementing a program to ensure student borrower protection and compliance. However, the legislation and subsequent implementation did not take into consideration the existence of sub-servicers, who many companies utilize to help ensure the safest and most efficient process for borrowers.

As is required, sub-servicers are licensed in the State of New York and assessed a fee based on the number of loans they service. For the benefit of the borrower and in the interest of customer service, some master servicers are also obtaining a servicing license in New York, to enable them to monitor the process and manage occasional customer escalations. In its current form, the licensing matrix fails to consider the existence of the sub-servicer and assesses the master servicer fees for loans that are being handled and serviced solely by the sub-servicers who are already being assessed a fee for that student loan.

Licensing and regulatory oversight creates increased protection for borrowers and consumers; the system should be fair and transparent to encourage maximum participation. Responsible companies are eager to participate, but they are being evaluated for loans that have already been paid for, thus creating a duplicate fee structure for a single loan portfolio. We humbly request regulatory clarification on how these costs are evaluated and calculated annually and that loan portfolios managed and licensing paid by a sub-servicer should be taken into consideration when evaluating the cost for licensing for the master provider.

We greatly appreciate your attention to this matter. Creating an accurate assessment regarding the licensing fees will not only help our members make informed decisions but will also contribute to the transparency and fairness of the licensing process.

Sincerely,

Phil Goldfeder
CEO, American Fintech Council