Sec. 102. Terms and conditions of Qualified ISAs
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Each Qualified ISA shall comply with the following: The Qualified ISA specifies the percentage of future income required to be paid. The maximum percentage of income an individual would be required to pay under the Qualified ISA shall not exceed 20 percent, and the product of such percentage and the number of monthly payments required under the Qualified ISA divided by 12 shall not exceed 2.25 (which figure is the product of 7.5 percent and the number of years in the longest allowable contract under paragraph (4)(A)).
The Qualified ISA specifies the definition of income to be used for purposes of calculating an individual’s obligation to pay under the Qualified ISA, which— shall not in any case include the income of the individual’s children; shall not include— any amount paid to the individual under title II or XVI of the Social Security Act ( 42 U.S.C. 401 et seq., 1381 et seq.) or under a State program funded title IV under of such Act ( 42 U.S.C. 601 et seq.); or any amount received by the individual under the Child Nutrition Act of 1966 ( 42 U.S.C. 1771 et seq.); shall include revenue sources primarily incurred from an individual's employment; and may include another revenue source besides employment if an individual has voluntarily chosen to not seek employment and is still receiving significant revenue from another source.
The Qualified ISA provides that when an individual subject to the Qualified ISA has an income that is equal to or below the threshold amount described in subparagraph (B), the percentage of income obligation for the individual is zero. The threshold amount under this subparagraph is an amount equal to (or at the option of the ISA funder, greater than)— 200 percent of the poverty line for a single person (as defined in section 673 of the Community Services Block Grant Act ( 42 U.S.C. 9902 )); or in the case of a Qualified ISA entered into before January 1, 2020, 150 percent of such poverty line for a single person.
Subparagraph
(A)shall not be interpreted to preclude the charging of fees or nominal payments (as described in paragraph (8)) during this period. The Qualified ISA specifies the maximum period of time during which the individual will be obligated to make a specified number of monthly payments of a percentage of the individual’s future income (excluding periods when just a nominal payment (as described under paragraph (8)) is required), which may not (except as provided in subparagraph (B)) exceed 360 months. The Qualified ISA may provide for the extension of such period by the number of months during which the individual’s percentage of income obligation (excluding nominal payments and fees) was zero. The Qualified ISA specifies the terms and conditions under which the individual subject to the agreement may terminate the agreement. The payments required under the Qualified ISA for an individual with income during the payment term that is less than or equal to 225 percent of the poverty line for a single person (as defined in section 673 of the Community Services Block Grant Act ( 42 U.S.C. 9902 )) shall not exceed the payments on a comparable loan that bears interest at a rate less than or equal to the annual percentage rate of interest limitation under section 987(b) of title 10, United States Code. The Qualified ISA provides that the total percentage of future income of the individual that the individual agrees to pay, under the current Qualified ISA and any other Qualified ISAs previously entered into by the individual, shall not exceed 20 percent. The Qualified ISA specifies any nominal monthly payment that is required during periods when the individual subject to the Qualified ISA 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); and the total number of nominal payments that may be required shall not exceed the maximum number of allowable payments described in paragraph (4)(A). The Qualified ISA specifies, at a minimum, individual rights with respect to each of the following: Default or delinquency. Overpayment or underpayment. Disability. Death. Service as a member of the armed services (including the National Guard and Reserves). If a Qualified ISA executed prior to the date of enactment of this Act does not meet the requirements in subparagraph (A), the ISA funder shall come into compliance with such subparagraph by issuing, not later than 180 days after the date of enactment of this Act, an addendum to the Qualified ISA that contains the information described in such subparagraph. An ISA funder of a Qualified ISA shall provide, to any individual intending to commit under a Qualified ISA to pay future income and before the individual enters into the agreement under the Qualified ISA, a written document that clearly and simply discloses— that the Qualified ISA is not credit or a loan, and that the amount the individual will be required to pay under the Qualified ISA— may be more or less than the amount provided to the individual pursuant to the Qualified ISA; and will vary in proportion to the individual’s future income; that the obligations of the individual under the Qualified ISA are dischargeable under bankruptcy law; a description of the terms in which the obligations of the individual under the Qualified ISA shall be extinguished in advance of full duration of the agreed-to term; the duration of the individual’s obligations under the Qualified ISA (absent such extinguishment), including any circumstances under which the duration of the Qualified ISA would be extended or extinguished; the percentage of income the individual is committing to pay under the Qualified ISA, including whether the percentage of income is fixed or variable under the Qualified ISA, and the minimum amount of annual income that triggers the individual’s obligation under the Qualified ISA to make payments for such year; the definition of income to be used for purposes of calculating the individual’s obligation under the Qualified ISA; a comparison of— the amounts and number of payments an individual would be required to pay under the Qualified ISA 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 Qualified ISA, as determined in accordance with guidance issued by the Director of the Bureau of Consumer Financial Protection; to the amounts and number of payments required to be paid under one or more comparable loans, including, at a minimum— a loan at a fixed or variable interest rate and with a number of payments determined by the Director of the Bureau of Consumer Financial Protection to be an approximation of the fixed or variable interest rate available to student loan borrowers in the private marketplace; and a comparable Federal Direct PLUS loan under part D of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087a et seq.), if the individual would be eligible for such a loan; and a prominent notice accompanying the comparison that clearly and conspicuously advises that loan payments may be required regardless of the income of an individual; income verification documentation, including personal tax records submitted to the Internal Revenue Service, that the individual may be required to provide under the Qualified ISA; intent to conduct annual reconciliation relating to obligations owed by the individual under the Qualified ISA; and any nominal payments, as described in subsection (a)(8), required under the Qualified ISA. The Qualified ISA disclosures required by paragraph
(1)shall be provided in a clear and conspicuous manner, and shall not be disclosed together with any other material terms or conditions that may be applicable to the Qualified ISA. A Qualified ISA represents an obligation by the individual to pay the specific percentage of future income, but shall not be construed to give the contract holder any rights over an individual’s actions other than as provided in this Act. Absent income documentation from an individual under a Qualified ISA, the ISA funder of such Qualified ISA (or the funder’s successor in interest) may assume a certain monthly income level for the individual, up to the greater of— the level that would create an obligation that is approximately equal to the amount required to return the initial Qualified ISA amount to the ISA funder over the remaining required payments; or the average monthly income for the individual from the previous 6 months of employment. 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 expressly states that it is intended to apply to Qualified ISAs. If an individual supplies an ISA funder (or the funder's successor in interest) with the individual's income verification information within 180 days of the ISA funder (or the funder's 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 the individual's actual obligation under the contract either refunded to the individual or credited to future obligations under the Qualified ISA.
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Sec. 102
Terms and conditions of Qualified ISAs
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