The US Consumer Financial Protection Bureau (CFPB) has slapped coding boot camp BloomTech with several punishments for alleged deceptive business practices.

The business, which claims on its site it will help students land their "dream job" in tech at companies like Amazon, Cisco, and Google, accepted the consent order without admitting or denying any wrongdoing.

In an announcement yesterday, the CFPB said it had taken action against BloomTech and its CEO Austen Allred for allegedly not disclosing the true cost of its loans to students and allegedly claiming overoptimistic hiring rates for BloomTech graduates. BloomTech, formerly Lambda School, has operated since 2017 and offers six- to nine-month vocational programs in science and engineering, with a focus on computer technology.

"BloomTech and its CEO sought to drive students toward income share loans that were marketed as risk-free, but in fact carried significant finance charges and many of the same risks as other credit products," said Rohit Chopra, director of the CFPB. With income share loans or income share agreements, BloomTech allowed students to pay tuition later but in exchange had to pay a percentage of their future income, CFPB claimed.

The agency alleged that BloomTech explicitly told students that its income share loans (which cost an average of $4k "finance charge" to use) weren't actually loans at all. The CFPB claimed in the settlement order [PDF] a "significant majority" of students used these loans to finance their education, and alleged each student could end up paying up to $30k of their income to BloomTech to settle the loans.

According to the order:

Additionally, BloomTech is alleged to have sold some of these loans to investors, breaking its promise to "only make money when you [students] do." On top of that, the CFPB claimed BloomTech broke the Holder Rule by neglecting to afford students certain rights when it sold loans to investors, which is illegal according to the consumer protection watchdog.

According to the order, the programming academy is alleged to have projected fanciful hiring rates for its graduates between 71 and 86 percent, when in reality the actual rate was around 50 percent but sometimes as low as 30 percent, which BloomTech disclosed to investors in a "non public" report, claimed the filing. The document alleged that in one instance, CEO Austen Allred said that one cohort had a 100 percent hiring rate, but then later clarified it was in a cohort of just a single student.

BloomTech was advertising a 86 percent figure on its website at the time of writing.

"The CFPB found that BloomTech and Allred used deceptive statements and took unreasonable advantage of consumers' reasonable reliance on BloomTech to act in their interests," the agency said.

Allred responded to the CFPB's statement on X, saying that while he accepted the penalties, he denied the allegations. "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," the CEO said. "We do so without agreeing to or denying any of the allegations in the consent order."

He also stated that BloomTech "largely stopped using" income share loans in 2021, and doesn't offer them anymore. However, the company's FAQ still mentions income share loans (or ISAs) under one question.

Students can rip up their income share agreements

The sanctions for BloomTech appear to be quite severe. It can no longer collect any income share loan payments from grads that didn't get a job in the past year, and has to cancel the multi-thousand dollar finance charge for students who graduated more than 18 months ago and don't work a job making more than $70k a year. Plus, current students must be allowed to drop their loans and withdraw, or be able to continue attending but with a third-party loan.

As an added bonus, BloomTech and Allred personally have to pay into the CFPB's victims' relief fund, with the company getting fined $64k and the CEO $100k. Plus, Allred is prohibited from student lending for a decade. Given that a single student could pay up to $30k on a single shared income loan, the fines probably aren't the biggest financial pain for the coding institution.

We reached out to the CFPB, which declined to comment. We also reached out to BloomTech for comment, but we haven't heard back yet, and will update if and when we do. ®

https://www.theregister.com//2024/04/18/feds_say_coding_boot_camp/