The chairman of the U.S. Senate Banking Committee said on Friday he will introduce a bill that would impose new disclosure and conduct rules on the fast-growing private student loan market.
“This legislation will help to ensure that students understand the products they are buying to help finance their education, and that unfair and deceptive practices in this market are outlawed,” said Sen. Chris Dodd, a Connecticut Democrat and presidential candidate.

Dodd’s committee held a hearing on Wednesday to look into questionable practices in the private student loan market, which now accounts for 20 percent of lending to college students. The remaining 80 percent comes from government-guaranteed and direct government loans.

Dodd said his bill would “improve transparency, prevent unfair and deceptive private lending practices and eliminate conflicts of interest.”

The $85 billion student loan industry has been under investigation by congressional and state officials for months over alleged kickback schemes, conflicts of interest and, as of this week, possible discriminatory underwriting practices.

New York Attorney General Andrew Cuomo and congressional investigators have alleged some lenders paid kickbacks to college aid officers to curry favor and drum up business.

Some college officials allegedly took gifts, stock, payments and other perks. Several of these officials have quit their jobs, while many lenders and colleges have reached settlements with Cuomo and accepted a new code of conduct.

The U.S. House approved a bill to crack down on such practices last month, with a focus chiefly on the government-guaranteed loans market.

Applying Cuomo’s code to the private loan market, the Dodd bill would bar lenders from kicking back percentages of new loans to colleges in a practice known as “revenue sharing.”

It would prohibit co-branding in which lenders offer loans to students using the brands of the colleges they attend, and it would ban gifts or other inducements to college aid officers in exchange for preferential treatment.

Also banned would be lender use of underwriting data that could limit loan availability to students “based on race, age, and other personal factors, or the institution they attend.”

Lenders would also have to make disclosures about the terms of private student loans more complete and understandable.

Major student loan companies include Sallie Mae, Wells Fargo & Co., Bank of America Corp., Citigroup, JPMorgan Chase & Co., Wachovia Corp., SunTrust Banks Inc. and others.