Manatt Financial Services Special Counsel Jonathan Joshua spoke with Asset-Backed Alert about a bipartisan bill that would regulate income share agreements (ISAs) at the federal level, giving investors more clarity and providing regulatory certainty both to ISA providers and to lenders offering loans with features similar to those of ISAs.
Joshua explained that the legislation clarifies that a contract has to state that it’s an ISA subject to this law to legally be considered an ISA. “That’s important because it allows lenders to offer loans that base repayment terms on a borrower’s income under existing requirements without having to worry about the possibility that they are inadvertently offering ISAs,” Joshua said. While there have been attempts to standardize ISAs in the past, Joshua explained that multi-jurisdictional regulatory efforts caused the product to fragment. “This new definition of an ISA will be critical to ensuring that lenders can incorporate some of the features of ISAs without inadvertently triggering ISA-specific laws,” he concluded.