Disclosures

(a) Disclosure guidelines Section 105 of the Truth in Lending Act (15 U.S.C. 1604) is amended by adding at the end the following: (j) Regulations related to OBF products Not later than 270 days after the date of enactment of the Outcomes-Based Financing (OBF) for Students Act, the Bureau shall prescribe regulations to carry out the purposes of this title, which may contain such additional requirements, classifications, differentiations, or other provisions, and may provide for such adjustments and exceptions for all or any class of transactions, as in the judgment of the Bureau are necessary or proper to effectuate the purposes of this title, to prevent circumvention or evasion thereof, or to facilitate compliance therewith. (k) Model disclosure forms and clauses for OBF products Not later than 270 days after the date of enactment of the Outcomes-Based Financing (OBF) for Students Act, the Bureau shall publish a model integrated disclosure for OBF products in order to facilitate compliance with the disclosure requirements of this title and aid OBF recipients in understanding the transaction by utilizing readily understandable language to simplify the technical nature of the disclosures.. (b) Form of disclosure; additional information Section 122(a) of the Truth in Lending Act (15 U.S.C. 1632(a)) is amended— (1) in the second sentence, by striking The terms and inserting For a product that is not an OBF product, the terms; and (2) by inserting after the second sentence For an OBF product, the terms payment calculation method, income threshold, and completion mechanisms shall be disclosed more conspicuously than other terms, data, or information provided in connection with a transaction, except for information relating to the identity of the creditor, and information in the table referenced in section 128(e)(12)(B)(v). The terms annual percentage rate and finance charge shall be disclosed more conspicuously than other terms, data, or information provided in such table.. (c) Transactions other than under an open end credit plan Section 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)) is amended by adding at the end the following: (12) Disclosure requirements for outcomes-based financing products (A) In general In addition to the disclosures required under this chapter, and in lieu of the disclosure requirements in paragraphs (3), (4), (5) and (6) of subsection (a), subparagraph (C) of paragraph (2), and paragraphs (1), (2), and (4) of this subsection, an OBF provider shall disclose the following: (i) Disclosures required in private education loan applications and solicitations In any application for an OBF product, or a solicitation for an OBF product without requiring an application, the OBF provider shall disclose to the OBF recipient, clearly and conspicuously— (I) the disclosures required under subclauses (I) and (II) of clause (ii), including the potential range of terms applicable to the OBF product for each disclosure item; (II) the disclosures required under subclauses (III) and (IV) of clause (ii); (III) the comparison table described in clause (ii)(V), using the highest dollar amount or percentage that the OBF provider could set under the OBF payment calculation method described in clause (ii)(I) based on an amount financed of $10,000, or $5,000 if the OBF provider only offers OBF products of this type for less than $5,000; and (IV) the disclosures required under— (aa) paragraph (1)(J) (relating to eligibility requirements); (bb) subparagraphs (L) through (N) and (Q) of paragraph (1) (relating to the availability of other potential sources of information and aid); (cc) paragraph (1)(O) (relating to the 30-day approval period); and (dd) paragraph (1)(P) (relating to self-certification). (ii) Disclosures at the time of private education loan approval Contemporaneously with the approval of an OBF product application, and before the loan transaction is consummated, the OBF provider shall disclose to the borrower, clearly and conspicuously, the following: (I) As relates to the periodic payment obligation: (aa) The term Payment Calculation Method and a description of the method through which periodic payments will be calculated. (bb) The term income threshold and the income threshold for the OBF product, followed by a description that states, The minimum income you must make to trigger a payment obligation. If your income is less than this income threshold, you will not owe any amount for that period.. (cc) A statement that during periods in which the OBF recipient’s income is below the income threshold— (AA) the OBF recipient will not owe an OBF payment for that period of time; and (BB) any such period of non-payment will not count toward the OBF maximum number of payments but will count toward the OBF duration. (II) As relates to various ways the OBF recipient can complete the obligation, which shall include (where applicable): (aa) The term Maximum Number of Required Payments and the OBF maximum number of payments, followed by a description that states, The maximum number of payments you will be required to make when your income is equal to or greater than the income threshold. (bb) The term Maximum Duration and the OBF duration, followed by a description that states, The maximum amount of time that you are required to make income-determined payments, excluding any extensions that you request. (cc) In the case of an outcomes-based loan, a disclosure of— (AA) the applicable rate of interest in effect on the date of approval; (BB) whether the rate of interest applicable to the private education loan is fixed or variable; (CC) any limitations on interest rate adjustments, both in terms of frequency and amount, or the lack thereof, if applicable; and (DD) if the rate of interest is variable, a statement that the varying rate of interest will affect how much the OBF recipient must pay to complete the outcomes-based loan early. (dd) In the case of an outcomes-based payment agreement, any payment cap, which may be a fixed number, fixed multiple, effective annual percentage rate, or other mechanism. (III) The Annual Percentage Rate, with a description stating that the Annual Percentage Rate will vary based on the consumer’s income after completing school and that the consumer should refer to the table described in subclause (V) to see the range of Annual Percentage Rates based on different after-school income scenarios. (IV) As relates to other disclosure items: (aa) A statement that the obligations of the OBF recipient under the OBF product would be dischargeable in a case under title 11, United States Code, in the same manner as a loan that is not described in section 523(a)(8) of title 11, United States Code. (bb) The disclosure required under paragraph (2)(J), relating to available payment deferral options. (cc) The following statement: IMPORTANT NOTICE REQUIRED BY LAW: Students are cautioned to consider carefully entering into this outcomes-based financing product if their total future payment commitment, including any other forms of education finance, may exceed 20 percent of their expected future income. Your total future obligation may exceed this percentage if you have received additional education financing, including other outcomes-based financing products, Department of Education Direct or FFEL Loans, or private education loans.. (dd) Applicable finance charges, late fees, penalties, and adjustments to principal (as applicable), based on borrower defaults or late payments applicable to the OBF product. (ee) Fees, or the range of fees, applicable to the OBF product. (ff) The definition of income to be used for purposes of calculating the OBF recipient’s obligation under the OBF product. (gg) A statement regarding whether the OBF provider intends to engage in a process of reconciliation to determine if the amount paid by the OBF recipient for the preceding year is more than, equal to, or less than the OBF payments owed under the OBF product, including— (AA) a description of the process in which the OBF recipient must participate for the OBF provider to verify the OBF recipient’s income; and (BB) a description of any tax records or forms that the OBF recipient must execute or that the OBF provider intends to submit to the Internal Revenue Service. (V) A comparison table that— (aa) calculated for the range of income scenarios described in item (bb) and assuming the OBF recipient earns at that income level for the duration of the contract, discloses— (AA) the total dollar amount of payments; (BB) the number of OBF payments; (CC) the finance charge; and (DD) the annual percentage rate, with the scenario where an OBF recipient never makes any payments shown as -100% (no payments); (bb) with respect to the disclosures required under item (aa), includes, at a minimum, the obligations for the OBF recipient— (AA) with no income; (BB) with income at the income threshold; and (CC) for various income scenarios, including, at a minimum, calculations at annual incomes of $40,000, $60,000, $80,000, $100,000, $125,000, $150,000, $175,000, and $200,000 (or in lieu of these income scenarios, other income scenarios that the Bureau specifies by rule); and (cc) includes the following statement: This table assumes you have the same income over the entire duration of your OBF product. It does not take into account changes in income. Your income will likely change over time.. (VI) The disclosures required under paragraph (2)(L) (relating to the 30-day approval period) and subparagraphs (M) and (N) of paragraph (2) (relating to the availability of other potential sources of aid). (iii) Disclosures at the time of private education loan consummation Contemporaneously with the consummation of an OBF product, an OBF provider shall make to the OBF recipient each of the disclosures described in— (I) subclauses (I) through (IV) of clause (ii) (and in the case of an outcomes-based loan with a variable rate of interest, adjusted, as necessary, for the rate of interest in effect on the date of consummation, based on the index used); (II) subparagraphs (M) and (N) of paragraph (2) (relating to the availability of other potential sources of aid); and (III) paragraph (7) (relating to right to cancel). (B) Rulemaking The Bureau may prescribe, by rule, such other information as necessary or appropriate that shall be disclosed for consumers to make informed borrowing decisions related to OBF products..