On April 17, 2024, the Consumer Financial Protection Bureau entered an order against BloomTech Inc., which does business as the Bloom Institute of Technology, and its CEO, Austen Allred, for mischaracterizing BloomTech’s income-share agreements (ISAs) and misrepresenting its graduates’ employment rates.

BloomTech is a for-profit school that offers short-term training programs in web development, data science and backend engineering. According to the CFPB, BloomTech lured students into financing their training programs with promises of high graduate employability. To finance students’ education, BloomTech offered ISAs, under which students received their education in exchange for a percentage of their future earnings.

According to the CFPB, BloomTech falsely told students that its ISAs were not loans, carried no finance charges and were “risk free.” In fact, the ISAs were loans that carried substantial risk. For instance, a single missed payment could trigger a default. Further, the CFPB found that BloomTech hid key terms of its financing product, including the finance charge and annual percentage rate.

Also according to the CFPB, BloomTech advertised on its website that 71% to 86% of its students were placed in jobs within six months of graduation, when its nonpublic reporting to investors consistently showed placement rates closer to 50%. And Allred tweeted that the school achieved a 100% job placement rate in one of its cohorts, but he later acknowledged in a private message that the sample size was just one student.

This conduct, according to the CFPB, violated several federal laws. BloomTech’s statements that its ISAs were not loans and its misrepresentations of its graduates’ employment rates violated the Consumer Financial Protection Act’s prohibition on deceptive conduct. By taking unreasonable advantage of students’ reasonable reliance on BloomTech to act in students’ interests, BloomTech violated the CFPA’s prohibition on abusive conduct. BloomTech’s failure to disclose its ISAs’ finance charges and APR violated the Truth in Lending Act (TILA) and Regulation Z. And BloomTech’s failure to include in its ISAs a notice preserving students’ claims and defenses in the event that their ISAs were assigned to a third party violated the Federal Trade Commission’s “Holder Rule.” In some cases, BloomTech immediately sold the ISAs to third parties, which contradicted its representations to students that it would not get paid until the students secured a job.

The CFPB’s order permanently bans BloomTech from consumer lending activities and bans Allred from student lending activities for 10 years. The order also requires BloomTech to stop collections for some students, reforms some ISAs to eliminate finance charges, and allows students to withdraw from BloomTech’s program and cancel their ISAs or continue in the program with a third-party loan. The order imposed penalties of $64,235 on BloomTech and $100,000 on Allred.

This is the CFPB’s second enforcement action targeting ISAs. In 2021, the CFPB brought a case against Better Future Forward, Inc. that held the company liable for offering ISAs that failed to comply with TILA and Regulation Z.