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Bill Proposed to Enforce Income Share Agreement Consumer Protections

Four senators have joined forces to safeguard Income Share Agreements (ISAs) with consumer protections through the introduction of new legislation.

Introduced by Todd Young (R-IN), Mark Warner (D-VA), Marco Rubio (R-FL), and Chris Coons (D-DE), the ISA Student Protection Act would bring income share agreements under federal consumer protection laws and give the Consumer Financial Protection Bureau oversight authority.

Laws like the Fair Credit Reporting Act, Fair Debt Collection Practices Act, the Military Lending Act, Servicemembers Civil Relief Act, and the Equal Credit Opportunity Act would apply to ISAs if the bill is passed.

The bill would exempt students who make less than 200 percent of the federal poverty level from making payments towards the agreement. It would also bar ISA providers from making agreements with students where the required payments would be higher than 20 percent of their income for shorter-term contracts.

“There are students across the country who are already benefitting from ISAs and deserve the safeguards and certainty the ISA Student Protection Act would provide, including protections during periods of low earnings, dischargeability in bankruptcy, and oversight authority by the Consumer Financial Protection Bureau,” Warner said.

Under the act, ISA providers will be required to brief students on their conditions by comparing monthly payments under ISAs to private or federal loans. It would also clarify the tax treatment of ISA contributions for both funders and recipients.

“It’s getting harder and harder for American families to afford the rising costs of college, and graduates are often forced to run up tens of thousands of dollars in student loan debt,” Rubio said.

“I am proud to re-introduce this innovative legislation to empower students to leverage their future income today and access the financial resources of businesses, individuals, and nonprofit organizations in order to achieve their higher education goals.”

Lately, many colleges and universities across the nation have begun offering ISAs to their students instead of traditional student loans. Norwich University, Colorado Mountain College, University of Utah and the University of California San Diego Extension are few of the schools that have introduced ISAs.

What Student Borrowers Should Know About Income Share Agreements