San Francisco, CA – The Consumer Financial Protection Bureau (CFPB) has issued a significant order against BloomTech, formerly known as Lambda School, and its CEO, Austen Allred, imposing a permanent ban on the company from all consumer-lending activities and prohibiting Allred from student-lending activities for ten years. The action, announced on April 17, 2024, stems from findings that BloomTech and Allred allegedly deceived students about the true nature and costs of their income share agreements (ISAs) and made false claims regarding graduate job placement rates.
The CFPB found that BloomTech falsely marketed its ISAs as "risk-free" and not loans, despite them carrying an average finance charge of approximately $4,000. Additionally, the bureau stated that BloomTech advertised job placement rates as high as 71% to 86%, while internal metrics shown to investors indicated rates closer to 50%. In one instance, Allred reportedly tweeted a 100% job placement rate for a cohort, later acknowledging the sample size was a single student.
Despite these regulatory challenges, Austen Allred continues to promote BloomTech's programs and seek new partnerships. In a recent tweet, Allred stated: > "To apply: https://t.co/06w4S93HWR To become a hiring partner: Make sure to chat with our team to reserve a hiring credit in the next cohort ASAP. We often “sell out” months in advance https://t.co/DPzEhbVyYa." This indicates the company's ongoing efforts to recruit students and engage with employers, even as it navigates the implications of the CFPB's order.
The CFPB's order also mandates that BloomTech and Allred cease collecting payments on ISAs for graduates who did not secure qualifying jobs, eliminate finance charges for certain agreements, and allow current students the option to withdraw without penalty. Civil penalties totaling over $164,000 were also assessed, with $64,235 from BloomTech and $100,000 from Allred, to be deposited into a victim relief fund.
BloomTech, founded in 2017 as Lambda School, offers short-term training programs in web development, data science, and backend engineering. The company's business model heavily relied on ISAs, where students agreed to pay a percentage of their future income once they secured a job earning above a certain threshold. This regulatory action underscores a broader focus by the CFPB on the practices of for-profit educational institutions and the transparency of alternative financing models like ISAs.