Deceiving students about the cost of loans and making false claims about graduates’ hiring rates have led to a consent order and a civil money penalty (CMP) against a San Francisco-based, for-profit vocational school and its CEO, the federal consumer financial protection agency said Wednesday.
The consent order was issued against BloomTech, a “coding boot camp,” and its leader, Austen Allred, the Consumer Financial Protection Bureau (CFPB) said.
According to the agency, it found that BloomTech and Allred falsely told students the school’s “income share” agreement (ISA) contracts were not loans, when in fact the agreements were loans carrying an average finance charge of around $4,000. The CFPB alleged that BloomTech and Allred lured prospective enrollees with inflated promises of job-placement rates as high as 86%, when the company’s internal metrics showed placement rates closer to 50% and in some cases as low as 30%.
The bureau said its order permanently bans BloomTech from all consumer-lending activities and bans Allred from any student-lending activities for 10 years.
The agency also ordered BloomTech and Allred to cease collecting payments on income share loans for graduates who did not have a qualifying job, eliminate finance changes for certain agreements, and allow students the option to withdraw without penalty.
BloomTech and Allred must also pay more than $164,000 in civil penalties, the CFPB said, with the company paying $64,000 and the CEO the balance.
The CFPB described Bloomtech as operating short-term, typically six-to-nine-month training programs in areas such as web development, data science, and backend engineering.
Since 2017, the CFPB said, BloomTech originated at least 11,000 income share loans, with most of BloomTech students funding their tuition with the loans. “Under almost all these loans, students who earn more than $50,000 in a related field are required to pay BloomTech 17% of their pre-tax income each month until they make 24 payments or hit a ‘cap’ of $30,000 in total payments,” the CFPB said.
Under the order, the company and Allred must cease collecting payments on certain graduates, amend the “income share” loan contracts, allow students to withdraw without penalty, and pay the CMP.