BloomTech, formerly known as Lambda School, has recently come under fire from the US Consumer Financial Protection Bureau (CFPB) for deceptive practices in student lending activities. The company, led by CEO Austin Allred, has been fined $164,000 and banned from issuing any more student loans due to its misleading advertising tactics.
One of the main issues highlighted by the CFPB is BloomTech’s use of Income Sharing Agreements (ISAs) that were disguised as a way for students to secure high-paying tech jobs “risk free” with “no loans.” In reality, these ISAs were functioning as loans, with BloomTech earning a significant finance charge on each agreement.
The consequences of BloomTech’s deceptive practices have had a profound impact on students. Many students who were promised job placement and career opportunities found themselves struggling to find gainful employment after completing the program. The CFPB’s report revealed that BloomTech’s curricula frequently changed and relied on teaching assistants with limited programming backgrounds, leaving students to teach themselves the course content.
In addition to the misleading advertising about job opportunities, BloomTech also inflated its job placement rates to present a more favorable image to students and investors. While publicly touting job placement rates of at least 71 percent, the company’s internal reporting to investors showed placement rates closer to 50 percent.
The CFPB has taken decisive action against BloomTech, ordering the company to cancel loans for students who haven’t made payments in the last 12 months, and return money to graduates who paid a premium but did not secure a job making $70,000 or more. Austin Allred, the CEO of BloomTech, has personally agreed to pay a significant portion of the fine and is banned from student lending activities for 10 years.
Despite the regulatory intervention and penalties imposed on BloomTech, the company can still continue operating with third-party loans. The deceptive practices and false advertising employed by BloomTech have not only harmed students financially but have also eroded trust in the coding bootcamp industry as a whole. It is essential for students to conduct thorough research and due diligence before enrolling in any educational program to avoid falling victim to similar deceptive practices in the future.
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