SAN FRANCISCO (Diya TV) — BloomTech and its CEO, Austen Allred, were fined on Tuesday, following the The Consumer Financial Protection Bureau (CFPB) investigation into the organization’s deceptive practices. The CFPB found that BloomTech, previously known as Lambda School, deceived students about the cost of loans and made false claims about graduates’ hiring rates.
The government agency permanently banned BloomTech from all consumer-lending activities and banned Allred from student-lending activities for 10 years. Additionally, BloomTech must pay $64,000, and Allred must pay $100,000 in civil penalties, which will go toward a victim relief fund, according to the agency.
BloomTech, founded in 2017 as Lambda School, was considered a pioneer in the income share agreement (ISA) model, meaning that students didn’t have to pay tuition upfront to attend the boot camp. Instead, they would pay a share of their income each month to the school after landing a job paying above a certain amount.
The CFPB found that BloomTech falsely told students that the ISAs were not loans when the loans carried an average finance charge of $4,000. The agency also noted that a single missed payment could trigger a default, leading to the remainder of the tuition being due immediately. It said BloomTech did not disclose key terms like the finance charge and annual percentage rate, as required by law.
It also found that BloomTech inflated its job placement rate, saying 71% to 86% of its graduates landed jobs, while internal metrics shown to investors were closer to 50%. At one point, Allred tweeted that the school achieved a 100% job-placement rate in one of its cohorts, and later acknowledged in a private message that the sample size was just one student, the CFPB said.
Leaked documents showed that BloomTech’s job placement rate in qualifying jobs during the first half of 2020 was only around 30%, Business Insider previously reported.
The CFPB ordered BloomTech and Allred to stop collecting payments on ISA loans for graduates who didn’t have a qualifying job. Its ISA loan terms must eliminate the finance charge for students who graduated from the program more than 18 months ago and obtained a qualifying job making $70,000 or less. The school also must allow students the option to withdraw from the program without penalty.
“BloomTech and its CEO sought to drive students toward income share loans that were marketed as risk-free, but in fact carried significant finance charges and many of the same risks as other credit products,” CFPB Director Rohit Chopra said.
Allred wrote in a post on X that BloomTech “decided to settle the matter because it was clear that ongoing litigation would be extremely time-consuming, incredibly expensive, and distract us from our core mission. We do so without agreeing to or denying any of the allegations in the consent order.”
“BloomTech continues to focus on its core mission: improving the lives of students and enabling them to fulfill their economic potential,” he added. “While it’s been frustrating, we’re glad to put this behind us.”
Several students previously took legal action against BloomTech, alleging it misrepresented its job placement rate, BI reported.
BI also previously reported on student complaints about the quality of education and lack of assistance in landing tech jobs. At the time, the coding boot camp faced a fine from a California agency for violating state law by failing to register itself properly.
