The recent actions taken by the US Consumer Financial Protection Bureau (CFPB) against BloomTech, formerly known as Lambda School, have shed light on the deceptive practices employed by the coding bootcamp. Despite rebranding itself as BloomTech, the company found itself in hot water with the CFPB for misleading students about its income sharing agreements (ISAs) which were essentially treated as student loans.
BloomTech lured students in with promises of high-paying tech jobs that were “risk-free” and involved “no loans.” However, the reality was far from this facade. Students were required to pay 17 percent of their future income for five years, as opposed to the $20,000 tuition fee. The CFPB found that these ISAs were indeed loans, as BloomTech was profiting off the finance charges and students could face collections if they failed to make payments. Moreover, BloomTech was selling student debts to investors at a substantial markup.
With over 11,000 students impacted by these deceptive practices between 2017 and 2023, the CFPB intervened by permanently banning BloomTech from issuing any more student loans. The agency also ordered BloomTech to cancel loans for students who have not made payments in the last 12 months and to provide relief to graduates who did not secure high-paying jobs despite paying a premium. These actions, while necessary, may be too little, too late for some students who have already been burdened with debt.
Among the numerous concerns raised by students and the CFPB was BloomTech’s questionable job placement rates. The company boasted a 100 percent job placement rate in one cohort, only to later admit that this rate was based on a single student. Subsequent reports revealed that the actual job placement rates were much lower than what was publicly disclosed, raising questions about the school’s integrity and transparency.
Despite facing penalties and restrictions from the CFPB, BloomTech is not going out of business. The company has agreed to the terms set forth by the agency, with CEO Austin Allred personally bearing a significant portion of the fine. However, BloomTech can continue to operate by securing third-party loans instead of issuing student loans directly. The challenge for BloomTech moving forward will be to rebuild trust with students and ensure transparency in its operations.
The case of BloomTech serves as a cautionary tale about the pitfalls of for-profit education institutions that prioritize profits over the well-being of students. The actions taken by the CFPB against BloomTech underscore the importance of regulating the student lending industry and holding institutions accountable for their deceptive practices. Students must be vigilant when choosing educational programs and do thorough research to avoid falling victim to predatory practices.
Leave a Reply