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Media Press Releases CFPB Halts Silicon Valley Predatory Student Lending Scheme, Bans Disgraced Tech Founder from Student Loan Industry

CFPB Halts Silicon Valley Predatory Student Lending Scheme, Bans Disgraced Tech Founder from Student Loan Industry

Austen Allred, Pioneering “Income Share Agreement” Loan Shark and Founder of For-Profit Coding Bootcamp BloomTech (formerly “Lambda School”) Named in Federal Enforcement Action; Company and Founder Must Cancel Debt Owed by Some Current and Former Students

April 17, 2024 | WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) announced an enforcement action today against for-profit college BloomTech (formerly “Lambda School”) and its disgraced founder, Austen Allred, for deception and predatory lending. As a result of this action, BloomTech is banned from engaging in consumer lending, and Allred is banned from working in the student lending industry. The CFPB also directed Allred and his firm to cease collecting payments on predatory student loans for many of their remaining borrowers. 

For years, Allred and his firm used deceptive marketing to trap students in predatory private student loans called “income share agreements” (ISAs), promising to train tech workers for lucrative careers as software engineers. Today’s action follows years of lawsuits, investigations, and other allegations of illegal practices by Allred and his company.

In response to today’s enforcement action, Student Borrower Protection Center (SBPC) Senior Fellow Ben Kaufman released the following statement:

“For years, law enforcement treated bootcamp fraudsters like Austen Allred with kid gloves, even as a growing pile of private lawsuits, investigations, and harrowing student narratives pointed to flagrant deception and harm. Today, the CFPB sent a clear message—no matter how many venture dollars you raise, which journalists you dazzle, or what flashy ads you buy, if you rip off American students, there will be consequences. Austen Allred lied about the quality of the school he was running, the loans he forced on students, and the types of jobs (if any) that students were being hired into after graduation. 

“Today’s action puts Silicon Valley on notice: if you lie, cheat, or steal, you will face justice, and you will never work in this town again.”

In 2021, SBPC petitioned the CFPB to investigate Allred’s for-profit school, alleging that the school was violating the federal Truth in Lending Act by imposing unlawful prepayment penalties on its students, and violating the FTC’s holder rule by denying students required consumer protections in its loan contracts. CFPB’s announcement alleges Allred and his for-profit school were engaged in both of these unlawful practices, which were halted by today’s action.

In 2019, California’s Bureau of Private Postsecondary Education (BPPE) fined BloomTech $75,000 for operating without a license and ordered it to cease operating. BloomTech ignored this order and refused to cease operating, but rather than enforce its mandates, BPPE backed down, eventually coming to an agreement whereby BPPE approved BloomTech’s operations.

BloomTech promised students a cutting-edge education taught by experienced professionals, claimed that it would profit from its ISAs only if students succeeded, and advertised that students could expect to enter high-paying careers at major tech companies such as Google. In reality, according to the CFPB’s Consent Order, BloomTech had curricula that “frequently changed and relied in part on teaching assistants paid $15 per hour with limited programming backgrounds,” “often sold its ISAs to investors right after originating them,” and knew as early as 2018 that it was “unable to place students [in jobs] at scale.” Moreover, while BloomTech advertised its ISAs as a consumer-friendly alternative student loans, the CFPB’s Consent Order notes that the average student paid a $4,000 financing fee on their loan, the equivalent of an APR of over 18 percent.


Income Share Agreements are risky financing products that require students to pledge a portion of their future income in exchange for money to pay for college or training programs. ISAs have been touted by Wall Street and Silicon Valley as a solution to the student debt crisis, but these products pose serious risks to students. A long line of investigations and legal actions against ISA companies has revealed that the industry’s business model depends on questionable and illegal conduct, including the spurious claim that ISAs are not loans or a form of credit.

A decade ago, ISAs were heralded as an alternative type of student loan. Over $250 million in ISAs were originated in 2019, and analysts expected $500 million in ISAs to be originated in 2020 before the COVID pandemic began. Though industry-wide data are not available, industry reports and marketing materials indicate that the ISA industry ramped up operations during the Trump Administration. Further, the association between ISAs and the types of predatory, for-profit career training programs known to take advantage of economic downturns implies that the volume of ISAs originated in 2020 and 2021 may have ultimately been much larger than those in preceding years and may continue to grow at a rapid pace.

In 2020, the SBPC documented in a report, how—regardless of industry’s claims otherwise—ISAs fall squarely within the definitions of “credit” and “debt” for the purposes of federal consumer financial law.  In analyzing the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Truth in Lending Act, and the Consumer Financial Protection Act of 2010, the report made clear that ISAs are clearly within the ambit of existing consumer protections, and that firms operating in the ISA market will not escape scrutiny for predatory, abusive, discriminatory, or otherwise unfair behavior.

Beyond denying that they have to follow the law, firms operating in the ISA market have also been caught engaging in the following harmful practices:

  • Relying on Deceptive Marketing. The National Consumer Law Center and the SPBC filed a complaint with the Federal Trade Commission alleging Vemo engaged in a range of deceptive marketing tactics related to Vemo-backed ISAs offered by Purdue University and the University of Utah.
  • Servicing and Collecting Void, Unenforceable Debts. Prominent legacy student loan companies may be servicing and collecting on ISAs made in violation of state licensing or usury laws. The servicing or collection of void, unenforceable debts may be an unfair practice in violation of federal and state consumer law.
  • Engaging in Racial Discrimination. The NAACP Legal Defense Fund and the SBPC demanded ISA provider Stride Funding cease discriminatory lending practices that appear to charge students attending Historically Black Colleges and Universities more than similarly situated borrowers who attend predominantly white colleges.
  • Charging Illegal Prepayment Penalties. A review of publicly available ISA agreements reveals that in most cases, ISA providers charge borrowers extremely high prepayment penalties, locking vulnerable borrowers into high-cost subprime credit—a practice common among predatory mortgage lenders in the years before the financial crisis. The federal Truth in Lending Act bans this practice for all private student lenders, including ISA providers.

The SBPC works with advocates, legal experts, and government partners to analyze and expose the potential harm ISAs cause to borrowers. This work includes original reports and analysis on ISAs and consumer protection, investigations into unscrupulous practices by ISA providers, an emerging risks conference, and complaints filed with regulators on behalf of harmed borrowers.

In 2021, the SBPC supported a class action lawsuit brought by dozens of students against for-profit coding academy MakeSchool and ISA company Vemo Education alleging a wide range of fraudulent and deceptive practices.

Further Reading

View more of the SBPC’s work on ISAs, emerging risks, and consumer protection: See Here


About Student Borrower Protection Center

Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.

Learn more at or follow SBPC on Twitter @theSBPC.

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