Coding Bootcamp Disciplined for Deceiving Students, Lending Practices

• A coding bootcamp provider allegedly misled students using inflated job placement rates.
• The Consumer Financial Protection Bureau reached a settlement agreement with the company and its CEO.
• The provider, BloomTech, is permanently banned from all consumer lending activities.
• It will also pay over $164,000 to a victims fund.

The Consumer Financial Protection Bureau (CFPB) issued an order against a San Francisco-based coding bootcamp provider on Wednesday.

The CFPB found that bootcamp provider BloomTech and CEO Austen Allred deceived students about graduates’ job placement rates and the true cost of its loan product. BloomTech and Allred reached a settlement with the bureau that will see the company pay over $164,000 toward a CFPB-managed victims’ relief fund.

BloomTech and Allred did not confirm or deny any allegations as part of the settlement.

“We 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,” Allred said in a post on X, formerly Twitter. “BloomTech continues to focus on its core mission: improving the lives of students and enabling them to fulfill their economic potential. While it’s been frustrating, we’re glad to put this behind us.”

BloomTech, a for-profit institution, is headquartered in San Francisco and is owned primarily by Allred and various Silicon Valley venture capital funds, according to the CFPB. Allred founded the company as the Lambda School in 2017 and rebranded it as BloomTech or the Bloom Institute of Technology in 2022.

This action marks the latest in a long line of adverse actions against for-profit educational institutions under the Biden administration.

BloomTech Falsely Advertised Loans as Income Share Agreements

According to the CFPB, BloomTech lured potential students with overinflated job placement rates.

BloomTech advertised placement rates as high as 86%, the CFPB stated. The company’s internal metrics, however, showed rates closer to 50% or even as low as 30% in some cases.

Additionally, the CFPB alleged that BloomTech falsely advertised that its income-share agreements (ISAs) were not loans.

ISAs are common in bootcamps. Rather than setting a flat rate for the program, students agree to pay a percentage of their income after graduation. ISAs previously were not considered to be loans, and it wasn’t until 2022 that the CFPB formally classified ISAs as private student loans.

According to The CFPB, BloomTech hid the cost and nature of their “income share” loans by not disclosing key terms like the finance charge and annual percentage rate, as required by law. BloomTech charged students 17% of their pre-tax incomes if they landed a tech job paying more than $50,000 per year after completing the program. This means such students would have to make payments for 24 months or until they made $30,000 in total payments.

BloomTech has originated 11,000 ISAs since 2017, the CFPB said.

The bureau’s order permanently bans BloomTech from all consumer-lending activities and bars Allred from all student-lending activities for the next decade. The company must also stop collecting payments on all existing ISAs for graduates without a qualifying job, eliminate finance changes for certain agreements, and allow students to withdraw from their agreement “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 in a statement. “Today’s action underscores our increased focus on investigating individual executives and, when appropriate, charging them with breaking the law.”

Allred said on X that BloomTech “largely” stopped issuing ISAs in 2021 and currently does not offer any.