August 5, 2021 | WASHINGTON, DC — Today, the California Department of Financial Protection and Innovation (DFPI) announced a landmark consent order with New York-based Meratas, Inc., a company that partners with educational institutions to offer students Income Share Agreements or ISAs to finance post-secondary education and training. This is the first public enforcement action by a regulator against an ISA provider.
In response, SBPC Policy Director Mike Pierce released the following statement:
“Across the country, schools and finance companies like Meratas have tricked students into taking on huge debts to pay for college by pretending they offer something other than a student loan. Today’s action by California regulators is a clear sign that this industry’s shell game has come to an end — regulators will stand up for students and companies will be expected to follow the law.”
California DFPI Press Release: California DFPI Enters Groundbreaking Consent Order with NY-Based Income Share Agreements Servicer
Income Share Agreements are financing products that require students to pledge a portion of their future income in exchange for money to pay for college. ISAs have been touted by venture capitalists and Silicon Valley as a solution to the student debt crisis, but these products pose serious risks to students and could violate a number of federal and state laws.
The SBPC is working with partners to analyze and expose the potential harm ISAs may cause to borrowers and raise awareness among policymakers and institutions. This work includes original reports and analysis on ISAs and consumer protection, investigations into unscrupulous practices by ISA providers, an emerging risks conference, and complaints filed with regulators on behalf of harmed borrowers.
Last month, SBPC supported a class action lawsuit brought by dozens of students agains for-profit coding academy Make School and ISA company Vemo Education alleging a wide range of fraudulent and deceptive practices.
View more on the SBPC’s work on ISAs, emerging risks, and consumer protection here.