Interim Final Regulations Address Identity-Theft Loan Discharges

USA Funds^®’ policy staff encourages lenders and lender-servicers to note the new interim final regulations for false-certification loan discharge due to identity theft.

The regulations, noted in CFR 682.402(e), are among those that the U.S. Department of Education issued on Aug. 8, 2006.

The new federal regulations, effective Sept. 8, 2006, require that the borrower provide the lender or servicer a copy of the local-, state-, or federal-court verdict or judgment that conclusively determines that the borrower of the loan was the victim of the crime of identity theft. The regulations permit an individual to provide authentic examples of that individual’s identifying signature, along with an explanation of the facts, if the conviction or judgment did not expressly reference the Federal Family Education Loan Program loan as being obtained as a result of the crime. 

Lenders must file a claim for a false-certification discharge due to identity theft for the entire outstanding loan amount within 60 days of receiving the documentation outlined in 34 CFR 682.402(e)(3)(v). 

The Higher Education Reconciliation Act of 2005 adds identity theft as a reason for obtaining a false-certification discharge of an education loan, effective July 1, 2006.

If you have questions about the interim final regulations for loan discharge due to identity theft, please contact USA Funds’ policy advisers.