Consumer Financial Regulation Meets Income Share Agreements

By: Shu-Yi Oei

On Wednesday, I spoke at the National Association of Consumer Credit Administrators (NACCA) 81st Annual Meeting and Regulators’ Training Symposium in Minneapolis. The panel was “Trends in Lending: Emerging Loan Products,” and the topic I was asked to discuss was income share agreements (ISAs).

The Powerpoint slides from the talk are here. The last slide contains a partial source list for those who’d like to read more about income share agreements.

I have some thoughts, following the presentation, and after sitting in a couple of (non-tax) panels on lending and regulation:

(1) Legal Scholarship and Restlessness

The NACCA invitation supports my longstanding theory about restlessness and legal scholarship. The theory is that two (or three, or four) years after you did the project (and are likely bored with it) is when anyone else notices that you’ve even done it at all. Therefore, to me, a big part of the scholarly endeavor is really the ongoing fight against your own internal boredom-clock (which, if you’re like me, is likely a tad…accelerated).[fn1]

In this case, Diane Ring and I wrote about ISA transactions back in 2014. See Human Equity? Regulating the New Income Share Agreements, 68 Vand. L. Rev. 681 (2015). And then we became convinced that the industry had sputtered and tanked and so our attention transitioned to other projects.[fn2] But folks I spoke to at the NACCA conference—as well as others I’ve have talked to—assure me that this is not so! Fast-forward to 2016 and new offerings by Cumulus Funding and Purdue University suggest that perhaps the ISA market is not entirely dead after all. Also, those ISAs entered into between 2012-14 (offered by companies like Pave and Upstart) have been percolating in the ether, and the full array of their tax and other regulatory consequences are presumably becoming clearer as time goes on. State regulators are now starting to pay attention and think about how to weigh in. So the time seems right to refocus the attention on an old scholarly project.

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