May 29, 2024
The institute's six- to nine-month training programs in subjects including web development, data science, and computer engineering typically cost $20,000 to $30,000 in tuition, the CFPB order said.

High-profile Bay Area coding school BloomTech, which touts “dream” technology jobs at companies such as Google and Amazon, has been sanctioned by federal authorities for allegedly deceiving students about loan costs and making false claims about graduates’ hiring rates.

The Consumer Financial Protection Bureau in an order banned the school’s co-founder and CEO Austen Allred from student-loan activities for 10 years, and permanently banned the for-profit vocational institute, formerly called the Lambda School and also known as Bloom Institute of Technology, from all consumer lending.

The CFPB targeted the income-based repayment scheme used by nearly all BloomTech students that required payment of a percentage of income once graduates started earning at least $50,000 a year.

“BloomTech falsely claimed its ‘income share’ agreements were not loans, did not create debt, did not carry a finance charge, and were ‘risk free,’” the CFPB said in a news release Wednesday. “In fact, the agreements are loans with an average finance charge of $4,000. The loans carry substantial risk, as a single missed payment triggers a default and the remainder of the $30,000 ‘cap’ becomes due immediately.”

The school issued thousands of the income-share loans, but stopped offering them this year, according to the bureau’s order against the school.

BloomTech’s six- to nine-month training programs in subjects including web development, data science, and computer engineering typically cost $20,000 to $30,000 in tuition.

BloomTech, and Allred, enticed prospective students with job-placement rates as high as 86%, when internal metrics showed placement rates closer to 50% and sometimes as low as 30%, the news release said. “Allred tweeted that the school achieved a 100% job-placement rate in one of its cohorts, and later acknowledged in a private message that the sample size was just one student,” the news release said.

BloomTech, backed by Silicon Valley venture capital firms, advertised that top tech companies and Fortune 100 firms employed many of its graduates. But the school knew as early as 2018 that large corporations “rarely hired its graduates into high-paying, program-related jobs,” the CFPB’s order said.

Allred and the school violated the federal Consumer Financial Protection Act and Truth in Lending Act, the CFPB alleged.

Allred and the school agreed to sanctions without accepting wrongdoing, according to the order. The CEO and the school did not immediately respond to requests for comment.

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The San Francisco school, founded in Pleasanton in 2017 as the Lambda School, was renamed Bloom Institute of Technology, or BloomTech, in 2022, following a 2019 trademark lawsuit by San Francisco artificial intelligence company Lambda Labs.

In 2019, Lambda School paid a $50,000 fine to settle an allegation by the California Department of Consumer Affairs that it was operating without required approval from the California Bureau of Private Postsecondary Education.

The CFPB further targeted the school and its CEO over the claim that, “We don’t get paid until you do.” Many of the “income share” loans were sold to investors, so Allred and the school “often got paid long before a student finished the program and started earning a salary,” the agency said.

The CFPB ordered that BloomTech must stop collecting payments from graduates with “income share” loans who did not have a qualifying job in the past year. Such loans must have their terms amended to eliminate the finance charge for graduates who finished more than 18 months ago and obtained a qualifying job making $70,000 or less.

Current students with “income share” loans can quit the program and cancel the loans, or continue with a third-party loan. BloomTech will pay more than $64,000 in fines and Allred will pay $100,000 into a “victims relief fund,” the CFPB said.

 

 

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