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Student Loan Servicers (Prohibited Conduct & Responding to Borrower Inquiries) - Financial Regulation

Last reviewed/updated: December 22, 2022

A Student Loan Servicer is a person, regardless of location, responsible for servicing a student education loan to a student loan borrower, including a trust entity performing or having the authority to control student loan servicing.  Servicing a loan includes:

  • receiving any scheduled periodic payments from a student loan borrower or notification of the payments and applying the payments to a student loan borrower's account according to the terms of a student education loan or a contract governing the services;
  • during a period when no payment is required on a student education loan, maintaining account records for the student education loan and communicating with the student loan borrower regarding the student education loan on behalf of the holder of the student education loan; or
  • interacting with a student loan borrower to facilitate servicing activities, including interactions to help prevent default on obligations arising from a student education loan.
    Refer to Md. Code Ann., Education § 26-601.

Except as otherwise required by federal law or a court order, a Student Loan Servicer is prohibited from:

  • Employing, directly or indirectly, any scheme, device, or artifice to mislead a student loan borrower.
  • Engaging in any unfair, abusive, or deceptive trade practice toward any person.
  • Misrepresenting information or omitting any material information in connection with the servicing of a student education loan, including:
    • any fee owed by a student loan borrower,
    • any payment due by a student loan borrower,
    • the appropriateness or availability of a student loan borrower's repayment options,
    • the terms and conditions of the student education loan, or
    • the student loan borrower's obligations under the student education loan.
  • Obtaining property by misrepresentation of fact or omission of material fact.
  • Allocating a nonconforming payment in a manner other than as directed by the student loan borrower if, in writing or electronically, the student loan borrower:
    • makes a one-time direction for the allocation of future payments,
    • directs an allocation of a payment at the time the payment is made,
    • directs an allocation in response to an inquiry by the student loan servicer, or
    • changes an existing direction for the allocation of future payments.
  • Knowingly or recklessly misapplying or refusing to correct a misapplication of a payment from a student loan borrower.
  • Knowingly or recklessly providing inaccurate information to a consumer reporting agency or refusing to correct inaccurate information provided to a consumer reporting agency.
  • If a student loan servicer regularly reports information to a consumer reporting agency, failing to report the favorable history of a student loan borrower to a nationally recognized consumer reporting agency at least once a year.
  • Refusing to communicate with an authorized representative of a student loan borrower who provides a written authorization signed by the student loan borrower (NOTE: A student loan servicer may adopt procedures to verify that an authorized representative of a student loan borrower is, in fact, authorized to act on behalf of the student loan borrower).
  • Negligently making a false statement or omitting a material fact in connection with any information report filed with, or any investigation conducted by, a state or local government agency.
  • Violating any federal law concerning student education loan servicing.

Generally, a Student Loan Servicer shall acknowledge receipt of a written inquiry or complaint from a student loan borrower or an authorized representative of the borrower within 10 days and provide information responding to the written inquiry or complaint within 30 days of receipt of a written inquiry or complaint. If a written inquiry or complaint relates to a borrower's account balance, the Student Loan Servicer shall respond by either stating that the account balance has been corrected or explaining why it believes that the account is correct.

Maryland’s Student Loan Ombudsman and the Office of Financial Regulation have issued a Student Loan Borrower’s Bill of Rights restating the foregoing rights and obligations and Student Loan Servicers are expected to be familiar with that document (PDF available for download here). 

NOTE: If a student loan borrower requests a document (in the possession or control of the Student Loan Servicer) concerning the borrower’s account, the document shall be provided to the borrower within 30 days after receiving that request.


Laws, Rules, and Regulations

A Student Loan Servicer is expected to be knowledgeable about and in compliance with their obligations under Maryland law when servicing student education loans in Maryland, and any other applicable State or Federal statutes, rules, and regulations.

Maryland laws, rules, and regulations can be found by accessing the Annotated Code of Maryland and Rules  and Code of Maryland Regulations (COMAR). Certain relevant Maryland laws, rules, and/or regulations include, but are not necessarily limited to: