BloomTech, formerly known as Lambda School, has recently come under fire from the US Consumer Financial Protection Bureau (CFPB) for its misleading practices regarding student loans. The company advertised a way for students to enter high-paying tech jobs without taking out traditional loans, but the CFPB discovered that the Income Sharing Agreements (ISAs) offered by BloomTech were essentially loans in disguise.
BloomTech failed to disclose the true nature of the ISAs to students, presenting them as a “risk-free” way to pay for tuition by giving up a percentage of their future income for a specified period. However, the CFPB found that BloomTech was earning substantial finance charges on these agreements, treating them as loans while avoiding the regulatory requirements that come with issuing traditional student loans.
As a result of their deceptive practices, BloomTech and its CEO were fined $164,000 and permanently banned from issuing any more student loans. In addition, the company was ordered to cancel loans for students who had not made payments in the last 12 months, allow current students to leave the program without debt, and provide refunds to graduates who did not secure high-paying jobs as promised.
Questionable Claims
Aside from the financial misconduct, BloomTech also faced criticism for the quality of its educational programs. Students reported that the curriculum frequently changed, and many had to teach themselves the course content due to inexperienced teaching assistants. Despite claims of high job placement rates, BloomTech’s own reporting to investors revealed lower success rates than publicly advertised.
Future of BloomTech
Despite the penalties imposed by the CFPB, BloomTech will continue to operate under third-party loans. While the ban on issuing student loans may curtail their deceptive practices, the damage to the company’s reputation and the financial losses incurred from the fines could have long-lasting effects on BloomTech’s future.
The case of BloomTech highlights the dangers of deceptive practices in the student loan industry and the importance of regulatory oversight to protect consumers. As students continue to seek alternative ways to finance their education, it is crucial for authorities to hold institutions like BloomTech accountable for their actions and ensure transparency in all financial agreements.