Sec. 302. Required disclosures for income share agreements
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The ISA provider shall make the disclosures required by this section clearly and conspicuously in writing, in a form that the ISA recipient may retain. The disclosures required by this section may be provided to the ISA recipient in electronic form in accordance with the Electronic Signatures in Global and National Commerce Act ( 15 U.S.C. 7001 et seq. ). The disclosures required by this section shall— be grouped together; be segregated from anything that is not such a disclosure; and only contain information directly related to the disclosures required under this section.
If any information necessary for an accurate disclosure is unknown to the ISA provider, the ISA provider shall make the disclosure based on the best information reasonably available at the time the disclosure is provided to the ISA recipient, and shall state clearly that the disclosure is an estimate. In any case where an income share agreement transaction involves more than one ISA provider, only one set of disclosures shall be given and the ISA providers shall agree among themselves which ISA provider shall comply with the requirements that this title imposes on any or all of the ISA providers.
In any case where an income share agreement transaction has more than one ISA recipient, the disclosures may be made to any ISA recipient whose income will be used to calculate the ISA payments due to the ISA provider. An ISA provider of an income share agreement (regardless of whether the income share agreement is an educational ISA) shall provide, to any person that applies for or signs a consumer income share agreement, a written document that clearly and simply discloses the following information:
A statement that the income share agreement is not a fixed payment installment loan, and that the amount the ISA recipient will be required to pay under the income share agreement may be more or less than the amount financed by the ISA provider and will vary in proportion to the ISA recipient’s future income. An ISA provider may satisfy the requirements of this paragraph by providing a table that compares periodic payments under the ISA at different income levels showing that payments vary with income, or that also compares such periodic payments under the ISA at different income levels with a loan product.
In the case of an educational ISA, the following statement: This income share agreement is not a grant or scholarship. If your income is above the income Threshold, you will have to make payments under this income share agreement. . The following statement: Payments due under this income share agreement are determined by your income. Your payments are calculated using the ISA payment calculation method described in your ISA. The amount you pay may be more than, equal to, or less than the amount financed. .
In a series of boxes or other device designed to feature the following information more prominently than elsewhere in the income share agreement disclosures, the following information: The term Amount Financed and the dollar amount of the amount funded, followed by a description that states, The amount of funds you will receive or that will be credited on your behalf. . The term ISA Payment Calculation Method and the following: In the case of an ISA payment calculation method that is a percentage (or schedule of percentages), such percentage (or schedule of percentages) followed by a description that states, The percentage of your income used to calculate your ISA Payment. and, if the ISA payment calculation method is a schedule of percentages, an explanation of where the ISA recipient can learn more about how the ISA recipient’s income percentage is determined.
In the case of an ISA payment calculation method that is a schedule of fixed dollar amounts calculated based on the ISA recipient's income for a payment period, the schedule of fixed amounts (or a reference to the location of the schedule in the ISA) followed by a description that states, The amount of your ISA payment will vary based on your income. See your ISA for more information. . The term Maximum Number of Income-Determined Payments and the ISA maximum number of payments, followed by a description that states, The maximum number of ISA Payments you will make when your income is above the income threshold. .
The term Maximum Duration and the ISA duration, followed by a description that states, The maximum amount of time that you are required to make income-determined payments, excluding any extensions that you request. . The term Income Threshold and the income threshold for the income share agreement, followed by a description that states, The minimum income you must make in order to trigger a payment obligation under this income share agreement. If your income is less than or equal to this income threshold, you will not owe any ISA Payments for that period. .
A statement that during periods in which the ISA recipient’s income is not above the income threshold— the ISA recipient will not owe an ISA payment for that period of time; and any such period of non-payment will not count towards the ISA maximum number of payments but will count toward the ISA duration. A statement that the obligations of the ISA recipient under the income share agreement would be dischargeable in a case under title 11, United States Code, in the same manner as a loan that is not described in section 523(a)(8) of title 11, United States Code.
A description of the terms under which the obligations of the ISA recipient under the income share agreement shall be extinguished in advance of the full ISA duration. The definition of income to be used for purposes of calculating the ISA recipient’s obligation under the income share agreement, subject to section 104(a). A comparison table that includes the following: The amounts and number of ISA payments that an ISA recipient would be required to pay under the income share agreement at a range of annual income levels stated as both a monthly and annual income amount.
The income levels used in the disclosure under this paragraph shall include, at a minimum, the obligations for the ISA recipient— with no income; with income at the income threshold; and for various income scenarios, including, at a minimum, calculations at annual incomes of $40,000, $60,000, $80,000, $100,000, $125,000, $150,000, $175,000, and $200,000. The comparison table under this paragraph shall include the following statement: This table assumes you have the same Income over the entire term of your income share agreement.
It does not take into account changes in Income. Your Income will likely change over time. . The total of all ISA payments over the life of the income share agreement that the ISA recipient will have made in each of the income level scenarios described in subparagraph (A). The amounts and number of payments, the total of all payments, and the annual percentage rate required to be paid under one or more comparable loans, including, at a minimum— if elected by the Bureau, a loan at a fixed or variable rate and with a number of payments determined by the Bureau to be an approximation of the fixed or variable interest rate available to ISA recipients in the private marketplace; for an educational ISA, a comparable loan made under part D of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087a et seq. ) (including subsidized and unsubsidized scenarios), if the individual would be eligible for such a loan; and for an income share agreement that is not an educational ISA, a loan or loans that the ISA provider believes, in good faith, represents other alternative loan options available for the ISA recipient.
A statement of the intent of the ISA provider to engage in an annual process of reconciliation to determine if the ISA recipient’s ISA payments for the preceding year are more than, equal to, or less than the ISA payments owed under the income share agreement, including— a description of the process in which the ISA recipient must participate in order for the ISA provider to verify the ISA recipient’s income; and a description of any tax records or forms that the ISA recipient must execute or that the ISA provider intends to submit to the Internal Revenue Service.
A disclosure of the following items, to the extent applicable: The amount that is or will be paid directly to the ISA recipient. The amount that is or will be credited to the ISA recipient’s account to discharge obligations owed to the ISA provider. Each amount that is or will be paid to third persons by the ISA provider on the ISA recipient’s behalf, together with an identification of or reference to the third person. The total amount of any charges that will be paid by the ISA recipient before or at the time of the consummation of the transaction, or have been withheld from the proceeds of the income share agreement.
The name and mailing address of the ISA provider. A payment schedule that— shows the date upon which the first ISA payment is expected to be due or, if such date is not reasonably knowable— an estimated date using the best information available to the ISA provider; or a statement of the events that will trigger the first payment; and reflects each date thereafter during the ISA duration that an ISA payment may be due. The Director may, through a rulemaking process— add additional items to be disclosed under subsection
(d)if consumer testing shows those elements would help consumers better understand the nature of the ISA obligation or better compare it with other products; and require that additional income scenarios be included in the comparison table under paragraph (9)(A)(ii)(III), taking into account the income levels the ISA recipient might reasonably be expected to make given the intended use of the funds provided under the income share agreement, except in no case shall the number of scenarios exceed 20.
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