Recently, the US Consumer Financial Protection Bureau (CFPB) has taken action against Bloom Institute of Technology, previously known as Lambda School, for deceptive practices in its student lending activities. The CFPB has permanently banned BloomTech from issuing any more student loans, fined the company and its CEO $164,000, and released some students from their debt obligations. This ruling comes after years of complaints and concerns about the company’s practices.
One of the primary issues identified by the CFPB was BloomTech’s misleading advertising regarding its Income Sharing Agreements (ISAs). The company marketed these agreements as a way for students to enter high-paying tech jobs “risk-free” with “no loans” by paying a percentage of their future income for a specified period. However, the CFPB determined that these agreements were, in fact, loans, as BloomTech was earning significant finance charges on each one.
In addition to the financial issues, BloomTech also faced scrutiny for its job placement claims. The company boasted a 100 percent job placement rate in one of its cohorts, but later admitted that this figure was based on a single student. Furthermore, internal reporting to investors indicated much lower placement rates compared to the numbers shared publicly by the company. This discrepancy raised concerns about the accuracy of BloomTech’s job placement claims and the effectiveness of its education programs.
Another area of contention highlighted by the CFPB was the quality of education provided by BloomTech. Students reported frequent changes to the curriculum and the reliance on teaching assistants with limited programming backgrounds. Many students expressed frustration at having to teach themselves the course content due to the lack of professional instructors. This lack of adequate instruction raised doubts about the value of the education offered by BloomTech.
Despite the penalties imposed by the CFPB, BloomTech remains operational and can continue to offer education programs using third-party loans. The company’s CEO, Austin Allred, has agreed to pay a significant portion of the fine personally and is banned from student lending activities for a decade. However, questions remain about the company’s commitment to providing quality education and transparent financial practices in the future.
The CFPB’s ruling on BloomTech sheds light on the deceptive practices and shortcomings of the company in its student lending and education programs. The enforcement action serves as a reminder of the importance of transparency, accountability, and fairness in higher education and student financing. Students and prospective applicants must exercise caution and due diligence when considering educational institutions and financial agreements to avoid falling victim to misleading practices like those employed by BloomTech.
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