Credit by any Other Name: How Federal Consumer Financial Law Governs Income Share Agreements

Abstract

This article analyzes whether Income Share Agreements (ISAs) are governed by federal consumer financial law — particularly the Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010 (CFPA). The paper concludes that all of these federal laws apply to ISAs because ISAs meet the statutes’ various gate-keeping definitions of “credit” and “debt.” Although the question of whether ISAs are “credit” has not yet been addressed by the courts, our analysis reveals that ISAs share essential characteristics with traditional student loans and therefore should be treated the same. Critically, ISAs grant student borrowers the right to defer payment for educational services they receive. They also create debts for borrowers because borrowers are obligated to pay back a percentage of their post-graduation salaries for a defined period or, in the case of default or early repayment, a set amount that is typically a multiple of the amount borrowed. These repayment options result in students either paying back their ISAs in more than four installments or incurring a finance charge. As this article explains, these features of ISA repayment put them squarely within the coverage of existing federal consumer protection law. And the private entities providing them are, in turn, subject to regulation and enforcement under current federal law.