RSSThe CFPB fined San Francisco-based for-profit coding vocational school BloomTech and its CEO Austen Allred $164,000 for allegedly deceiving students about loan costs and making false claims about graduates’ hiring rates.
The April 17 order requires BloomTech to pay more than $64,000 and Allred $100,000, which will both be deposited into the CFPB’s victim relief fund. The CFPB permanently banned BloomTech from making consumer loans and barred Allred from student lending services for a decade.
BloomTech is banned from collecting additional payments on income-share loans for graduates who did not have a qualifying job in the past year. Income-share loan terms were changed to eliminate the finance charge for consumers who graduated from the program more than 18 months prior and secured a job making $70,000 or less. The CFPB also ordered students be able to withdraw from the program and cancel the loans or continue in the program with a loan from a third party.
Allred and BloomTech told students their income-share agreement contracts were not loans, the bureau said, when the agreements were in fact loans carrying an average finance charge of approximately $4,000. They also offered job-placement rates of up to 86 percent within six months of graduation, when the company’s internal metrics showed placement rates closer to 50 percent.
BloomTech allegedly broke a law by failing to disclose key terms such as the finance charge and annual percentage rate. The company also misrepresented their financial interests by making money from selling loans to investors before a student finished the program and started receiving a salary, the CFPB said.
The company also allegedly violated a federal consumer protection provision by not making loan holders subject to the legal claims and defenses students could make against the company. “Students were therefore deprived of rights they should have had when their ‘income-share’ loan was sold to an investor,” according to the CFPB.
BloomTech is owned by Allred and Silicon Valley venture-capital funds. Allred founded the company as the Lambda School in 2017, rebranding it as BloomTech or the Bloom Institute of Technology in 2022. The school offers six-to-nine-month training programs in web development, data science and backend engineering. BloomTech has originated at least 11,000 income share loans since 2017, with most students funding their tuition with the loans, according to the CFPB.
Most of the loans require students who make more than $50,000 in a related field to pay BloomTech 17 percent of their pre-tax income each month until they make 24 payments or reach $30,000 in total payments. A single missed payment allegedly triggered a default with the remaining $30,000 cap coming due immediately.
“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 CFPB Director Rohit Chopra. “Today’s action underscores our increased focus on investigating individual executives and, when appropriate, charging them with breaking the law.”
