Student loans

Mos, a student financial-aid startup backed by investors including Sequoia Capital and the rap star Jay-Z, is venturing into banking.

The agreement between the state’s financial regulator and Meratas will subject the company to heightened regulation after years of criticism that income-share agreements have escaped scrutiny.

Income share agreements, which allow college graduates to repay tuition financing as a percentage of their future income, have come under fire lately from consumer advocates for questionable marketing and other potential legal violations. Some hope a partnership between a Virginia bank and an ISA provider will give the product more legitimacy, while others worry it just masks risks for borrowers.

Rohit Chopra, who was the Consumer Financial Protection Bureau's first student loan ombudsman, is expected to crack down on unfair debt collection and other practices once he is confirmed by the Senate to lead the bureau. Observers predict he'll work closely with former CFPB Director Richard Cordray, who now oversees the Education Department’s $1.7 trillion portfolio of federal student loans.

Splash recently raised $44 million from investors. It plans to use the funds to aid small institutions that lack the resources to build their own loan platforms but are flush with deposits and looking for new lending opportunities.

The new calculation of borrowers’ monthly obligations will allow for a higher debt load from tuition, potentially opening eligibility to more Black applicants, according to public officials.

Cordray, named this week to lead the Education Department's office of federal student aid, cracked down on banks, student loan servicers and for-profit colleges when he was director of the Consumer Financial Protection Bureau.

Consumer advocates say "income share agreements" like those issued by Blue Ridge Bank of Martinsville, Va., and a Boston CDFI should have to comply with laws that govern more traditional credit products.

The deal between San Francisco-based lender and Social Capital Hedosophia Holdings Corp. V is latest example of a closely held firm going public by merging with a special purpose acquisition company.

The consumer bureau said the bank’s migration to a new servicing platform led to unauthorized payment withdrawals, misrepresentations about what borrowers owed and violations of a prior 2015 enforcement action.