Sec. 102. Terms and conditions of income-share agreement contracts
872 words·~4 min read·
/bill/116/hr/1810/ih/section-102·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
An income-share agreement shall not be treated as meeting the requirements of this section unless: The agreement specifies the percentage of future income required to be paid. The income-share agreement specifies the definition of income to be used for purposes of calculating an individual’s obligation to pay under the agreement, which shall not in any case include the income of the individual’s children. The agreement specifies the maximum period of time during which the individual will be obligated to pay a percentage of the individual’s future income (excluding periods when just a nominal payment (as described under paragraph (5)) is required), which may not (except as provided in subparagraph (B)) exceed 360 months.
The agreement may provide for the extension of such period by a number of months during which the individual’s percentage of income obligation (excluding nominal payments and fees) was zero, either because of further enrollment in education or training or the individual’s income was below the level at which payments are required in the agreement. The agreement specifies the terms and conditions under which the individual subject to the agreement may terminate the agreement. The agreement specifies any nominal monthly payment that is required during periods when the individual subject to the agreement has no percentage of income obligation, except that such nominal monthly payment shall not exceed twenty-five dollars per month (adjusted each year to reflect changes in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor for the most recent 12-month period for which the data are available).
An income-share agreement does not comply with the requirements of this section unless the individual who is committing under the agreement to pay future income is provided, before entering into such agreement, a written document that clearly and simply discloses— that the agreement is not a debt instrument, and that the amount the individual will be required to pay under the agreement— may be more or less than the amount provided to the individual pursuant to the agreement; and will vary in proportion to the individual’s future income; that the obligations of the individual under the agreement are not dischargeable under bankruptcy law, except in a case that would impose an undue hardship on the debtor and the debtor’s dependents; whether the obligations of the individual under the agreement may be extinguished through prepayment and, if so, under what terms; the duration of the individual’s obligations under the agreement (absent such prepayments), including any circumstances under which the duration of the agreement would be extended or discharged; the percentage of income the individual is committing to pay under the agreement, including whether the percentage of income is fixed or variable under the agreement, and the minimum amount of annual income that triggers the individual’s obligation under the agreement to make payments for such year; the definition of income to be used for purposes of calculating the individual’s obligation under the agreement; a comparison of— the amounts an individual would be required to pay under the income-share agreement at a range of annual income levels, which income levels shall correspond to the levels the individual might reasonably be expected to make given the intended use of the funds provided under the agreement, as determined in accordance with guidance issued by the Director of the Bureau of Consumer Financial Protection; to the amounts required to be paid under one or more comparable loans, including a loan at an interest rate determined by the Director of the Bureau of Consumer Financial Protection to be an approximation of the interest rate available to student loan borrowers in the private marketplace and, where applicable, a Federal Stafford loan; income verification documentation, including personal tax records submitted to the Internal Revenue Service, that the individual may be required to provide under the agreement; intent to conduct annual reconciliation relating to obligations owed by the individual under the agreement; and any nominal payments required under the agreement.
An income-share agreement represents an obligation by the individual pay the specific percentage of future income, but shall not be construed to give the contract holder any rights over an individual’s actions. Absent income documentation from an individual under an income-share agreement, the ISA funder of such agreement (or the funder’s successor in interest) may assume a certain income level for the individual, up to the level that would create an obligation equal to the maximum payment amount under the agreement.
Any obligation resulting from an assumed income level under paragraph
(1)shall not be considered to be imposing an unlawful fee under a State law unless such State law was issued after the date of the enactment of this Act and such State law expressly states that it is intended to apply to income-share agreements. If an individual supplies an ISA funder (or its successor in interest) with their income verification information within 180 days of the ISA funder (or its successor in interest) assuming an income level for such individual under paragraph (1), the individual shall be entitled to have any payments that were made in excess of their actual obligation under the contract either refunded to them or credited to future obligations under the contract.