This is part of a paper series exploring the role that consumer protection laws play in safeguarding borrowers from the harms posed by ISAs. Authored by legal experts at the forefront of consumer law, the papers look at how ISAs fit into the existing consumer financial protection framework, highlighting a strong legal foundation for policymakers and regulators as they seek to oversee these products and protect students.
This paper examines the industry argument that ISAs are “not credit,” and that therefore federal consumer protection laws do not apply. Analyzing the numerous federal laws that define “credit” and protect consumers in credit transactions, this paper lays out how ISAs share many characteristics with traditional student loans and how these financial products fall squarely within the consumer financial laws which broadly apply to credit products.
While ISAs have not yet been subject to enforcement actions by state and federal authorities, they are agreements through which consumers get money, in exchange for a promise to repay that money in the future. This and other features of ISA repayment put them squarely within the coverage of existing federal consumer protection law. As ISAs grow in prominence, it is critical that parties to these agreements must be subject to regulation and enforcement under current law.