The Consumer Financial Protection Bureau yesterday announced an enforcement action against an income share agreement provider that was accused of misrepresenting its product and failing to comply with federal law governing private student loans.
The consent order, against Better Future Forward, requires the company to stop misleading borrowers, eliminate prepayment penalties, and provide required disclosures that comply with federal law.
Income share agreement providers help individuals finance postsecondary education by providing funds in exchange for payments based on a percentage of the individuals’ future income. Better Future Forward was accused of falsely representing that ISAs are not loans and do not create debt, according to the CFPB. By alleging that its product was not a loan, the provider did not provide disclosures for private student loans as required by federal law, and allegedly imposed unlawful prepayment penalties on its products.
“The ISA industry has tried to evade oversight by claiming that its products are not loans,” said CFPB Acting Director Dave Uejio, in a statement. “But regardless of the name on the label, these products are credit and have to comply with federal consumer protections. The ISA industry cannot pretend that core consumer protection laws do not apply to their products.”
Better Future Forward neither admitted nor denied any of the allegations as part of the consent order. The consent order did not include a monetary penalty because the CFPB considered “its responsible conduct, namely that it demonstrated good faith and substantial cooperation beyond that required by law.” Under the terms of the consent order, the company must stop deceiving consumers about the nature of its products, must provide required disclosures, not object to any discharge of a student’s ISA through bankruptcy, and amend its contracts to eliminate prepayment penalties.
The Consumer Financial Protection Bureau yesterday announced an enforcement action against an income share agreement provider that was accused of misrepresenting its product and failing to comply with federal law governing private student loans.
The consent order, against Better Future Forward, requires the company to stop misleading borrowers, eliminate prepayment penalties, and provide required disclosures that comply with federal law.
Income share agreement providers help individuals finance postsecondary education by providing funds in exchange for payments based on a percentage of the individuals’ future income. Better Future Forward was accused of falsely representing that ISAs are not loans and do not create debt, according to the CFPB. By alleging that its product was not a loan, the provider did not provide disclosures for private student loans as required by federal law, and allegedly imposed unlawful prepayment penalties on its products.
“The ISA industry has tried to evade oversight by claiming that its products are not loans,” said CFPB Acting Director Dave Uejio, in a statement. “But regardless of the name on the label, these products are credit and have to comply with federal consumer protections. The ISA industry cannot pretend that core consumer protection laws do not apply to their products.”
Better Future Forward neither admitted nor denied any of the allegations as part of the consent order. The consent order did not include a monetary penalty because the CFPB considered “its responsible conduct, namely that it demonstrated good faith and substantial cooperation beyond that required by law.” Under the terms of the consent order, the company must stop deceiving consumers about the nature of its products, must provide required disclosures, not object to any discharge of a student’s ISA through bankruptcy, and amend its contracts to eliminate prepayment penalties.
