In light of recent action by the Consumer Financial Protection Bureau to affirm that income share agreements (ISAs) are a form of private student loan that must comply with all relevant state and federal consumer financial protections, the SBPC sent letters to a number of federal agencies highlighting the need for increased scrutiny of the ISA market. Given substantial evidence the SBPC has uncovered of widespread lawless and harmful practices by ISA companies, now is the time for law enforcement officials at all levels of government to hold the industry accountable and ensure justice for borrowers
Letter to the Department of Education’s Office of Postsecondary Education
In a letter to the U.S. Department of Education’s Office of Postsecondary Education (OPE), the SBPC called on OPE and the Department as a whole to address violations of transparency measures put in place to protect students and govern partnerships between colleges and private creditors—including income share agreement (ISA) companies. The letter was sent following the Consumer Financial Protection Bureau’s (CFPB) enforcement action against ISA lender Better Future Forward, that among other things, affirmed that ISAs are a form of credit and therefore subject to consumer protection laws.
A June investigation conducted by the SPBC revealed schools and lenders were failing to meet key disclosure and transparency requirements related to “Preferred Lender Arrangements,” breaking a ban on co-branding between lenders and schools. By not including ISA providers on their preferred lender lists, schools are violating the law and putting students at risk.
Letter to the Comptroller of the Currency
In a letter to the Office of the Comptroller of the Currency (OCC), the SBPC reaffirmed the risk of partnerships between banks and income share agreement providers following the CFPB’s enforcement action against ISA lender Better Future Forward. While Better Future Forward was not working in partnership with a national bank,the SBPC has identified identical conduct by ISA providers that partner with banks.
In May, the SBPC, along with five national consumer advocacy organizations called on the OCC to carefully scrutinize the relationships between banks originating loans on the behalf of ISA providers. These partnerships pose risk for borrowers and appear not to fit within the OCC’s stated guidelines for risk management around new bank products and services.
Read the Original Letter: Advocates Letter to the OCC on MentorWorks
Letter to the Federal Trade Commission
In a letter to the Federal Trade Commission (FTC), the SBPC called on the Commission to crack down on illegal, unfair, and deceptive tactics in the income share agreement market in light of the CFPB’s recent enforcement action against ISA lender Better Future Forward. The letter particularly stresses the need for the FTC to enforce the Holder Rule in order to protect students against fraud in the market.
In March, the SBPC sent a letter to the FTC highlighting evidence revealing that institutions, including many for-profit coding bootcamps, routinely omit language required by the Holder Rule in ISAs issued to students. The March letter followed an SBPC memo that outlined how ISAs issued to students are subject to the Holder Rule due to the product falling within the definition of “credit sale” under the Truth in Lending Act (“TILA”).
Read the Letter: Update on Income Share Agreements and the F.T.C.’s Holder Rule
Read the Memo: Income Share Agreements and the FTC’s Holder Rule