The Consumer Financial Protection Bureau issued an order against coding boot camp BloomTech and its CEO, Austen Allred, for deceiving students about the cost of loans and making false claims about graduates' hiring rates. The government agency banned Allred from student-lending activities for 10 years and permanently banned BloomTech from all consumer-lending activities, imposing civil penalties totaling $164,000. BloomTech, previously known as Lambda School, falsely told students that income share agreements were not loans and inflated its job placement rate. Leaked documents revealed that the job placement rate was only around 30%, leading to legal action by several students against the company. Additionally, complaints about the quality of education and lack of assistance in landing tech jobs have been reported.
Key Takeaways
- The Consumer Financial Protection Bureau issued an order against BloomTech and its CEO, Austen Allred, for deceiving students about the cost of loans and making false claims about graduates' hiring rates.
- BloomTech falsely told students that the ISAs were not loans, when in fact the loans carried an average finance charge of $4,000 and could trigger a default with a single missed payment.
- BloomTech inflated its job placement rate, claiming 71% to 86% of graduates landed jobs, while internal metrics shown to investors were closer to 50%.
- Documents revealed that BloomTech's job placement rate in qualifying jobs during the first half of 2020 was only around 30%.
- The CFPB ordered BloomTech to stop collecting payments on ISA loans for graduates who didn't have a qualifying job and to eliminate the finance charge for certain students, as well as allow students the option to withdraw from the program without penalty.
Analysis
The deceptive practices of BloomTech and CEO Austen Allred have led to significant consequences. The imposition of civil penalties totaling $164,000, the 10-year ban on Allred from student-lending activities, and the permanent ban on BloomTech from consumer-lending activities will have a direct and long-term impact on the company and its stakeholders. Students who were misled about the cost of loans and job placement rates are likely to face financial and career setbacks. This case also highlights the need for stricter regulations in the coding boot camp industry and the importance of transparency and accountability in educational institutions offering alternative financing options.
Did You Know?
- The Consumer Financial Protection Bureau (CFPB) ordered BloomTech and its CEO, Austen Allred, to stop collecting payments on Income Share Agreement (ISA) loans for graduates who didn't have a qualifying job and to eliminate the finance charge for certain students.
- BloomTech falsely told students that the ISAs were not loans, when in fact the loans carried an average finance charge of $4,000 and could trigger a default with a single missed payment.
- Documents revealed that BloomTech's job placement rate in qualifying jobs during the first half of 2020 was only around 30%.