The U.S. Consumer Financial Protection Bureau (CFPB) announced on Tuesday that BloomTech, formerly known as Lambda School, misled students about loan costs, misrepresented graduate hiring rates, and engaged in deceptive lending practices disguised as “income sharing” agreements with high fees.
The CFPB concluded its investigation into BloomTech and initiated penalties against the organization.
As per the order, BloomTech is permanently prohibited from consumer lending activities, and its CEO, Austen Allred, is banned from student lending for a decade. Additionally, BloomTech and Allred must stop collecting payments from graduates without qualifying jobs, allow students to withdraw funds without penalty, and eliminate certain finance charges.
CFPB Director Rohit Chopra stated, “BloomTech and its CEO marketed income share loans as risk-free, but in reality, they imposed significant finance charges and risks comparable to other credit products. Today’s action highlights our focus on holding individuals accountable for breaking the law.”
BloomTech and Allred are required to pay civil penalties totaling over $164,000 to the CFPB’s victims relief fund, with BloomTech contributing around $64,000 and Allred providing the remaining $100,000.
Founded by Allred in 2017 as Lambda School before rebranding to BloomTech in 2022, the organization faced criticism for its income share agreement model, which critics deemed predatory.
The CFPB found that BloomTech issued over 11,000 income-share loans for certification programs with hidden costs and misrepresented job placement rates. The school’s loans included undisclosed finance charges and default triggers, while job placement rates were lower than advertised. BloomTech also sold loans without recipient rights protection.
Prior to the CFPB order, BloomTech faced lawsuits alleging misrepresentation of job prospects and earnings potential. Leaked documents raised concerns about the company’s curriculum effectiveness.
To comply with the CFPB order, BloomTech must waive finance charges for certain graduates and offer alternatives for current students to cancel loans or continue under new terms.
