Sec. 2. Definitions

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In this Act: The term adverse action — means a denial or revocation of rights under an income share agreement, a change in the terms of an existing income share agreement, or a refusal to grant an income share agreement in substantially the amount or on substantially the terms requested; and does not include a refusal to extend additional disbursements or amounts financed under an income share agreement under an existing income share agreement arrangement if— the applicant is delinquent or otherwise in default; or such additional amounts would exceed a previously established limit on the amount financed.

The term amount financed means, with respect to an income share agreement, the amounts credited or advanced by the ISA provider to the ISA recipient or on behalf of the ISA recipient. The term annual percentage rate means the annual percentage rate described in section 1026.22(a) of title 12, Code of Federal Regulations. The term applicant means, with respect to an income share agreement, any individual who applies to an ISA provider directly or indirectly for an extension, renewal, or continuation of an income share agreement and includes applications for an additional amount exceeding a previously established limit on the amount financed.

The term Bureau means the Bureau of Consumer Financial Protection. The term comparable loan means, with respect to an income share agreement, a loan that— has an amount financed, as described in section 1026.18(b) of title 12, Code of Federal Regulations, that is equal to the total amount financed, as defined in paragraph (2), for the income share agreement; has— the same disbursements or financing dates, payment start date, and frequency of payments as the income share agreement; and an expected number of payments equal to the ISA maximum number of payments; and is fully amortized over the ISA duration, with substantially equal periodic payments of principal and interest.

The term consumer means a natural person using an income share agreement for personal, family, or household purposes. The term consumer protection regulation means a regulation that the Bureau is authorized to prescribe under Federal consumer financial law, as defined in section 1002 of the Consumer Financial Protection Act of 2010 ( 12 U.S.C. 5481 ). The term covered educational institution — means— an educational institution that would be an institution of higher education, if such determination was made without regard to the institution's accreditation status; and an institution-affiliated organization, as defined in section 151 of the Higher Education Act of 1965 ( 20 U.S.C. 1019 ); and includes an agent, officer, or employee of the institution of higher education or institution-affiliated organization.

The term date of the ISA means the date that is the later of— the date on which the income share agreement is signed by the ISA recipient and the ISA provider; or the date on which the income share agreement is accepted by the ISA recipient and the ISA provider. The term Director means the Director of the Bureau. The term disbursement , when used with respect to an income share agreement, means the advance of ISA financing to an ISA recipient or the advancing of ISA financing to a third party on the ISA recipient’s behalf.

The term educational ISA or educational income share agreement — means an income share agreement that— is not made, insured, or guaranteed under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ) or another federally subsidized educational finance program; pays amounts to, or on behalf of, the ISA recipient for— costs associated with a postsecondary training program, or any other program designed to increase the individual’s human capital, employability, or earning potential (and not limited to programs eligible to participate under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. )); any personal expenses (such as books, supplies, transportation, and living costs) incurred by the individual while enrolled in a program described in subclause (I); any other costs or expenses included in the definition of a qualified higher education expense , as defined in section 529(e)(3)(A) of the Internal Revenue Code of 1986; and the refinancing of loans or income share agreements used for the purposes described in subclauses

(I)through (III), and without regard as to whether the income share agreement is provided by the educational institution that the ISA recipient attends; and does not include a loan, open-end credit, or any loan or income share agreement that is secured by real property or a dwelling. The term education loan means— a loan made, insured, or guaranteed under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ) or any other loan made, insured, or guaranteed by the Federal Government; or a private education loan, as such term is defined in section 140(a) of the Truth in Lending Act ( 15 U.S.C. 1650(a) ). The term income means the ISA Recipient’s income, as established in the income share agreement under section 302(d)(8), subject to section 104. The term income share agreement means a financial product whereby— the ISA provider credits or advances financing to the ISA recipient or to a third party on behalf of the ISA recipient; or if the ISA provider is a merchant financing the sale of goods or services to the ISA recipient via the financial product, the ISA provider credits the amount financed toward the purchase of such goods or services; the ISA recipient is obligated to make periodic ISA payments (if any become due) to the ISA provider in the future calculated based upon and determined by the ISA recipient’s future income; the ISA recipient’s obligation to make payments (if any become due) to the ISA provider is conditional on the ISA recipient’s income exceeding the income threshold set in the income share agreement; there is an ISA duration after which the obligation is complete regardless of how much has been paid (as long as the ISA recipient has paid any prior amounts due); the ISA provider and the ISA recipient enter into an agreement that, as of the date of the ISA, includes each element described in clauses

(i)through (iv); and the agreement states that it is an income share agreement and subject to this Act. If a provider offers a financial product that meets the requirements of clauses

(i)through

(v)but does not include the statement described in clause (vi), then the financial product is not an income share agreement and shall be considered credit. The term income threshold means a fixed dollar amount that is the minimum income per payment period that an ISA recipient is required to earn before the ISA recipient is required to make a payment on an income share agreement for such payment period. The term institution of higher education has the meaning given the term in section 102 of the Higher Education Act of 1965 ( 20 U.S.C. 1002 ). The term ISA duration means the maximum length of time during which the income of an ISA recipient can be subject to an ISA payment (absent periods of payment relief pause at the request of the ISA recipient). The term ISA financing means the disbursement of funds by an ISA provider under an income share agreement. The term ISA maximum number of payments means the maximum number of ISA payments (during ISA payment periods in which the ISA recipient’s income is greater than the income threshold) that an ISA recipient could be required to make. The term ISA payment — means the amount of an ISA recipient’s periodic payment obligation, based on the terms of the income share agreement, during any payment period for which the ISA recipient's income is greater than the income threshold; and is calculated using the ISA payment calculation method, based on the ISA recipient’s income for the specified period. The term ISA payment calculation method means the ISA percentage, or the schedule of fixed dollar amounts based on the ISA recipient’s income for a payment period, that is used to calculate an ISA recipient’s ISA payment under the income share agreement. The ISA payment window means the period during which the ISA recipient is required to make ISA payments in periods where the ISA recipient's income is greater than the income threshold for the income share agreement. The term ISA percentage means a percentage of income (or schedule of percentages of income based on the ISA recipient's income in a given ISA payment period) used to calculate an ISA recipient’s ISA payment pursuant to an income share agreement. The term ISA provider means a person that provides financing to an ISA recipient pursuant to an income share agreement or, in the case of a person who is a merchant financing the sale of goods or services to the ISA recipient, the merchant. The term ISA recipient means a consumer that receives financing from an ISA provider pursuant to an income share agreement. The term loan means a financial product that— is credit, as defined in section 1026.2(a) of title 12, Code of Federal Regulations; is not an income share agreement; and involves the advance of a sum of money to a borrower under an obligation to repay the principal with a corresponding right to defer payment of the principal balance with or without interest. The term loan comparison means the comparison table required under section 302(d)(9). The term payment relief pause means a period of time that— is requested by the ISA recipient during which any payment obligation the ISA recipient would have is suspended; and does not count toward an ISA recipient’s ISA payment window or ISA maximum number of payments. The term person means a natural person or an organization, including a corporation, partnership, proprietorship, association, cooperative, estate, trust, or government unit. The term poverty line has the meaning given the term in section 673 of the Community Services Block Grant Act ( 42 U.S.C. 9902 ). The term Secretary means the Secretary of Education. The term State means the several States of the United States, the Commonwealth of Puerto Rico, the District of Columbia, Guam, American Samoa, the Virgin Islands, the Northern Mariana Islands, the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. The term State law means— any law, decision, rule, regulation, or other action having the effect of a law of any State or any political subdivision of a State, or any agency or instrumentality of a State or political subdivision of a State; and any law of the United States applicable only to the District of Columbia.

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Sec. 2

Definitions

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