BloomTech, formerly known as Lambda School, once touted itself as a gateway to high-paying tech jobs with a “risk-free” payment model that involved earning 17 percent of students’ future income for five years instead of traditional tuition loans. However, the US Consumer Financial Protection Bureau (CFPB) has recently exposed the company for its deceptive practices, leading to a ban on issuing student loans, fines totaling $164,000, and the release of some students from their debts.
Despite BloomTech’s insistence that their Income Sharing Agreements (ISAs) were not loans, the CFPB determined otherwise. The company was profiting from each agreement, students could face collections if they failed to make payments, and debts were being sold to investors. This revelation paints a different picture of the financial model BloomTech presented to its students, causing many to question the ethics behind its operations.
The CFPB’s action against BloomTech includes a permanent ban on issuing student loans, the cancellation of debts for non-paying students, and retroactive caps on loans for graduates who did not secure high-paying jobs as promised. The penalties imposed on the company and its CEO, Austin Allred, reveal the severity of the deceptive practices that were taking place within the institution.
In addition to its financial misconduct, BloomTech also faced scrutiny for its instructional practices. Reports revealed that the school frequently changed its curricula, relied on teaching assistants with limited programming backgrounds, and failed to provide students with adequate support to land jobs in the tech industry. This lack of professional guidance raised concerns about the quality of education students were receiving.
Another aspect of BloomTech’s misleading practices involved falsely inflated job placement rates. While the company claimed a 100 percent job placement rate for one cohort, further investigation revealed that this statistic was based on a single student. Internal reporting to investors showed much lower placement rates, indicating a discrepancy between the public image of the school and its actual outcomes.
Overall, the downfall of BloomTech serves as a cautionary tale about the importance of transparency, ethical business practices, and accountability in the education sector. Students and regulators alike must remain vigilant in ensuring that institutions uphold their promises and provide value to those seeking to further their careers in tech. The exposure of deceptive practices at BloomTech highlights the need for increased oversight and regulation to prevent similar incidents from occurring in the future.
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