BloomTech and CEO Austen Allred Face $164,000 Fine and Lending Ban from CFPB

San Francisco, CA – The Consumer Financial Protection Bureau (CFPB) has issued an order against coding boot camp BloomTech, formerly known as Lambda School, and its CEO, Austen Allred, for allegedly deceiving students regarding the nature and cost of their income share agreements (ISAs) and inflating job placement rates. The regulatory action, announced on April 17, 2024, imposes over $164,000 in civil penalties and significant operational restrictions on the company and its founder.

The CFPB found that BloomTech and Allred falsely marketed ISAs as non-loan agreements without finance charges, when in reality they functioned as loans with an average finance charge of approximately $4,000. Furthermore, the bureau alleged that BloomTech lured prospective students with job placement rates as high as 86%, despite internal metrics showing actual rates closer to 50%, and in some cases, as low as 30%.

A specific point of contention highlighted by the CFPB was Allred's claim of a "100 percent job-placement rate" for one cohort. Allred, in a social media post, clarified this by stating, "That was in response to a question when someone asked what % of the first UX cohort was hired. I said 100% but SMALL SAMPLE SIZE with small sample size in all caps." This defense underscores the marketing practices under scrutiny.

Under the terms of the CFPB's order, BloomTech is permanently banned from all consumer-lending activities, and Allred is prohibited from student-lending activities for ten years. The company is also mandated to cease collecting payments on ISAs for graduates who have not secured a qualifying job, amend existing ISA contracts to eliminate finance charges for certain graduates, and offer current students the option to withdraw without penalty.

BloomTech, which rebranded from Lambda School in 2022, has been a prominent player in the vocational education sector, offering short-term training programs in fields like web development and data science. The company's business model heavily relied on ISAs, where students would pay a percentage of their future income after securing a high-paying job.

Allred confirmed the settlement on social media, stating, "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." He added that BloomTech continues to focus on its mission of improving students' lives and enabling their economic potential, without admitting or denying the allegations. The penalties, including $64,235 from BloomTech and $100,000 from Allred, will be deposited into the CFPB’s victims relief fund.