On September 9, 2022, the California Department of Financial Protection & Innovation (the “DFPI”) issued a Notice of Proposed Regulatory Action proposing to make regulations under the Student Loans Servicing Act (Section 28100, and after.) and student loans: law on the rights of borrowers (article 1788.100 of the Civil Code, and following.). The comment period for the proposed settlement will end on October 28, 2022. Along with the notice, the DFPI issued a Initial statement of reasons and the text of the proposed settlement.
In its statement, the DFPI notes that the “proposed rules clarify that education finance products, including but not limited to revenue-sharing agreements and installment contracts, are student loans and that managers of these education finance products are covered by law and must be licensed. . The proposed rules define terms and documents specific to education finance products. The proposed rules also modify some existing rules, based on DFPI’s years of experience licensing student loan servicers and conducting regulatory reviews.
It should be noted that the regulations would define “revenue sharing agreement” or “ISA” to mean “an agreement between a student and a school or revenue sharing provider under which the student agrees to pay a percentage fixed amount of the student’s future income for the term payment, in exchange for waiving or covering the cost of all or part of the student’s tuition. Further, ISAs would be categorized as “education finance products,” which includes “all private student loans that are not traditional student loans,” and such products would be subject to the Act.