As student debt swells, Colorado lawmakers seek relief for borrowers by regulating debt collectors

Currently, loan servicers are regulated by the federal government, leaving some borrowers little recourse when mistakes are made

As student debt swells, Colorado lawmakers seek relief for borrowers by regulating debt collectors

This story was updated on May 3 to state that the Senate State, Veterans and Military Affairs Committee killed the bill 3-2. 

Colorado lawmakers want the state to crack down on student loan service providers as complaints from borrowers still paying off their student loan debt are on the rise.

Proposed legislation would have required companies that collect college loan payments to be licensed in Colorado, bringing them under the state’s regulatory purview. But the Republican-controlled Senate State, Veterans and Military Affairs Committee killed the bill 3-2. 

Currently, these companies are regulated by the federal government. But as student debt builds in Colorado — totalling $24.75 billion in 2017, according to the Consumer Financial Protection Bureau — so has frustration with how these service providers handle loan payments. In 2017, about 900 complaints against these companies were filed with the CFPB, up 78 percent from the prior year.

Common complaints include poor communication, not processing payments on time, lost paperwork, adding late fees and charges to payments already made, and putting borrowers into forbearance without prior notice, said Charley Olena, an advocacy director for New Era Colorado, a group backing the bill.

Jillian Coffey graduated from James Madison University in 2013 with a Bachelor of Arts degree and $25,000 in student debt, she said. When she changed jobs last year, she tried to switch over to an income-based repayment plan. But due to a clerical error, she said, her loan was put into forbearance without notice, adding additional interest to her loan totalling $200.

She said her loan servicer, Lincoln, Nebraska-based Nelnet, told her she could go through arbitration to contest the bill. She instead decided to file a complaint with the CFPB.

 “I was literally unable to remedy the issue,” she said.

State Rep. Faith Winter, a Westminster Democrat who said she still has a student loan debt of her own, said the bill was a step toward ensuring borrowers are treated fairly.

Winter, a lead sponsor on the bill, said payday loan debt, mortgage debt, credit debt, auto debt are all regulated under the state’s Uniform Consumer Credit Code.

“But (the code) doesn’t offer any protection for student debt,” Winter said. “For consumers of student loan debt, if their company is treating them badly, the state of Colorado has no recourse to correct that behavior.”  

Earlier this month, Education Secretary Betsy DeVos withdrew several 2016 policy memos issued under the Obama administration. One memo had set baseline borrower protections and required timely and accurate responses to inquiries and complaints.

“They are sending a really clear message from the federal level that they are more concerned about profit for these companies than … consumers,” said New Era Colorado’s Olena. “That’s why Colorado needs to step up.”

Several other states, including California, Connecticut, and Illinois, and District of Columbia have passed legislation that would allow the state to regulate student loan servicing companies. About a dozen other states are considering legislation, according to media reports.

Colorado’s bill passed the House Business Affairs and Labor Committee by a 7-6 party-line vote, an early indication that the bill had a slim chance of making it through the Republican-controlled Senate.  

During a committee hearing, Mike Feeley, an attorney with Denver-based law first Brownstein Hyatt Farber Schreck, testified against the bill on behalf of Nelnet. He said 92 percent of all student loans are federal loans, which are already regulated.

“The bill would simply add another layer of regulations on top of what is already a very heavily regulated industry,” Feeley said. The licensing requirement, he said, “will only add to the current complexity and borrower confusion and will take scarce sources away from consumer service.”

The Attorney General Cynthia Coffman supports the bill.

The Colorado Capitol. Photo by John Herrick

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About the Author

John Herrick

John is covering the 2018 legislative session. Follow him on Twitter @herrickjohnny and email him at

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