June 14, 2024

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Exposed: Consumer Financial Protection Bureau Exposes BloomTechs Deceptive Practices – What Students Need to Know

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BloomTech Deceptive Practices Unveiled by Consumer Financial Protection Bureau

A recent development from the U.S. Consumer Financial Protection Bureau has brought to light the deceptive practices of BloomTech, a for-profit coding bootcamp previously known as the Lambda School. The CFPB’s order exposes the organization’s false claims, illegal lending, and misleading marketing strategies, resulting in significant penalties for the institution and its CEO.

The Unveiling of Deceptive Practices

The CFPB’s investigation has revealed that BloomTech engaged in misleading students about the actual cost of loans, misrepresented graduate hiring rates, and participated in illegal lending practices under the guise of “income sharing” agreements with substantial fees.

The CFPB’s Penalties

As a consequence of the investigation, the CFPB has imposed several strict penalties on BloomTech and its CEO, Austen Allred. These include a ten-year ban on consumer lending activities for BloomTech, and a corresponding ban on student lending for Allred. Additionally, the agency is requiring BloomTech to cease loan collections from graduates who did not secure qualifying employment and allow students to withdraw funds without penalties. Furthermore, finance charges for certain agreements are to be eliminated.

Financial Ramifications

BloomTech and its CEO are obligated to pay over $164,000 in civil penalties to the CFPB, of which BloomTech will contribute approximately $64,000, with Allred responsible for the remaining $100,000.

Background and Criticisms

BloomTech, previously known as the Lambda School, originated in 2017 and rebranded in 2022. Based in San Francisco, the organization has faced criticism for its income share agreements (ISAs), which were perceived as predatory. The school offered short-term certification programs in fields such as web development, data science, and back-end engineering, and required recipients earning over $50,000 in related industries to pay 17% of their pre-tax income monthly.

Key Points:

– The CFPB uncovered deceptive practices by BloomTech, including false marketing claims and illegal lending activities.
– Strict penalties have been imposed on BloomTech and its CEO, including a ten-year ban on lending activities and significant civil penalties.
– BloomTech’s controversial income sharing agreements, misrepresented job placement rates, and prior legal issues have sparked widespread criticism and scrutiny.

In conclusion, the exposure of BloomTech’s deceptive practices by the CFPB serves as a reminder of the significance of transparency and honesty in educational financing and job placement representations. The outcomes of this investigation emphasize the need for prospective students to exercise caution and conduct thorough research when considering alternative educational programs and financing options.

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