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 how the antidiscrimination framework underpinning federal and state fair lending laws apply to Income Share Agreements (ISAs), with a particular focus on the Equal Credit Opportunity Act (ECOA). Although ISAs have been touted as a solution to the student debt crisis, features of existing ISAs threaten to exacerbate inequalities.
Evidence suggests that in some cases, communities of color are being exploited by predatory ISA products. In addition, some features used to set terms and conditions for ISAs, such as school- or major-based distinctions, risk unnecessarily perpetuating disparities among historically underserved groups.