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Press Press Releases Income Share Agreement Company and For-Profit School Sued for Deceptive Practices and Illegal Lending

Income Share Agreement Company and For-Profit School Sued for Deceptive Practices and Illegal Lending

Students and Advocates Demand Justice Against Top Applicant and Leif Technologies

December 17, 2021 | WASHINGTON, DC — Yesterday, two former students, with the support of the Student Borrower Protection Center (SBPC), filed lawsuits against a predatory online bootcamp scheme and a nationwide provider of a risky kind of private student loan known as an Income Share Agreement (ISA), alleging widespread deceptive practices, illegal lending, and unlawful collection of student loans. The borrowers allege that the companies engaged in fraud at every step of the process, peddling expensive financing to pay for sham training—leaving students stuck with false promises and piles of debt. The students and advocates are demanding these illicit debts be wiped out and that the school stop illegal operations.

The lawsuits were filed yesterday by California consumer protection attorney Melody Sequoia of the Sequoia Law Firm and by Benjamin Roesch of Jensen Morse Baker PLLC on behalf of borrowers defrauded by the school and preyed upon by the ISA company. 

A copy of the lawsuit filed against Elevate/Top Applicant and Leif in California is available here.

A copy of the lawsuit filed against Elevate/Top Applicant and Leif in Washington is available here.

Top Applicant, Inc. is a for-profit company that operates a 10-week online technology sales bootcamp from its CEO’s home in Arizona using the unregistered trade name “Elevate.” As the lawsuits filed yesterday outline, Elevate/Top Applicant’s “bootcamp” is nothing more than a predatory scheme to trap hundreds of students under unaffordable credit through lofty but false promises of high-paying jobs in the tech sector. Leif Technologies, Inc. is a student loan company that offers financing in the form of ISAs that students can use to attend bootcamps including Elevate/Top Applicant. Leif indicates that it has arranged hundreds of millions of dollars in ISA funding for tens of thousands of students at hundreds of schools.

Elevate/Top Applicant specifically targeted its program and Leif’s ISAs toward economically vulnerable students. For example, on Elevate’s website, the school discloses that: “[m]arginalized, non-traditional, first-gen, high-potential, are all adjectives that accurately describe the talent we source, and we source that talent with intention.” Other available information indicates that Elevate/Top Applicant’s “membership base is over 70% [people of color] and close to 50% women.”

Accompanying these lawsuits, the SBPC filed a formal referral to the Consumer Financial Protection Bureau (CFPB) requesting that the agency investigate Leif for its facilitation of Elevate/Top Applicant’s fraud and for broader harms that the company may already be upholding at other, comparable fraudulent institutions. Today’s referral shows that Leif may be failing to conduct even basic oversight of its hundreds of school partners, putting students at risk and necessitating immediate action from the CFPB.

A copy of the referral of Leif to the CFPB is available here.

“The students bringing these lawsuits are hardworking individuals who were looking for sales jobs in the tech industry,” said attorney Melody Sequoia who represents one of the students who sued Elevate/Top Applicant and Leif. “Using bait-and-switch tactics, false and misleading advertising, and a slew of other unfair business practices, Elevate/Top Applicant lured students into ISAs without properly disclosing what an ISA is, or terms of those agreements. Now Elevate/Top Applicant and Leif are trying to take those students’ wages to pay for a few weeks of subpar instruction, and that is fundamentally unfair and illegal.”

“Another pioneer of so-called Income-Share Agreements has shown itself to offer nothing more than scaffolding for scam schools that exploit the American Dream,” said SBPC executive director Mike Pierce. “Together, Leif and Top Applicant spun a web of lies that trapped economically vulnerable borrowers in high-cost, predatory loans. Today’s lawsuits will pursue justice for these students and put wind at the backs of government enforcement officials working to crack down on this rogue industry.”

Former Students Allege Widespread Fraud

In lawsuits filed in California and Washington, former students allege that Elevate/Top Applicant deceptively advertised a low-quality training program and tricked students into signing away the right to a percentage of their future income, all so that Elevate/Top Applicant could profit.

In particular, the students allege the following:

  • Elevate/Top Applicant lures students into its program with false claims and illegal deceptive advertising. Elevate/Top Applicant uses a wide array of lies, misrepresentations, and false promises to lure students into its trap. For example:
    • Elevate/Top Applicant lists its training program as a job posting on LinkedIn, breaking the law and creating the false impression that the training bootcamp will necessarily lead to a job with the company. 
    • Elevate/Top Applicant advertises a guarantee that students will get a career in tech earning $60,000 – $82,000 in their first year, and that students could earn “over $150,000 by year 3.” But there is ultimately no real income guarantee—and earnings at this advertised level do not materialize.
    • Elevate/Top Applicant claims online to be based in San Francisco, a clear effort to connect the school to the tech sector. But there is no evidence that the company has any presence in San Francisco, and instead it appears that the company operates out of the CEO’s house in Gilbert, Arizona. 
    • Until recently, Elevate/Top Applicant’s website included falsified student testimonials. For example, the website featured a student testimonial from “Teresa,” who appears to be a repurposed public photo of an executive at Microsoft with no apparent relation to the school. These false testimonials appear to have been removed from Elevate/Top Applicant’s website, but the company has since added without permission a picture of one of the plaintiffs in yesterday’s lawsuits in online advertising materials for its fraudulent program.
  • Elevate/Top Applicant directs students to take on predatory ISAs that Leif designs, originates, and manages in repayment. Elevate/Top Applicant drives students to finance attendance through a Leif ISA that requires students to sign away 10 percent of their gross salary for a total of up to $17,000. But that is just the start of the danger in the ISA that Leif manages for Elevate/Top Applicant:
    • Even though Elevate/Top Applicant says students won’t have to pay on the ISA until they are making $60,000 in a tech job, the ISA contract says they actually have to pay if they’re earning more than $40,000, regardless of whether the student actually works in a tech job.
    • The ISA agreement falsely and illegally claims that ISAs are “not a loan,” violating state and federal laws and giving borrowers the impression they do not enjoy consumer protections for private student loans.
    • The ISA is deceptively presented to students not as a loan, but as an “account setup document” that they have to complete to enroll in the program. 
    • The ISA agreement leaves out legally required language that borrowers rely on to be able to defend themselves if they are defrauded by their school.
    • The ISA charges borrowers up to $1,000 per month if they report their income incorrectly, even if by mistake.
    • The ISA agreement includes many extremely unreasonable and likely illegal terms, such as:
      • Requiring borrowers to set up a designated bank account that Leif can monitor and access.
      • Stating that borrowers owe on their ISA regardless of whether they are defrauded or whether they otherwise challenge the validity of their ISA.
  • Elevate/Top Applicant’s educational program falls far short of its lofty promises. Students report that Elevate/Top Applicant’s course of study offers no real training, amounting to nothing more than a lightly guided job hunt. Students find out after arriving that the “Sales Development Representative” jobs they are studying for are entry-level jobs that do not actually require training. Of ten students who enrolled in one Elevate/Top Applicant cohort, nine dropped out within two weeks citing poor program quality—but ISA collections have continued. Students report that those who do find jobs after enrolling did so on their own, while others simply did not ever find a job in tech sales.
  • Elevate/Top Applicant uses illegal tactics to collect on the predatory ISAs that Leif helped design and facilitate. Once students are caught in its web, Elevate/Top Applicant and Leif abusively hound students for payment. Elevate/Top Applicant’s CEO and COO personally text and email students in violation of the law, calling them “fools” and telling them to “man up” and “swallow your pride and embarrassment.” Elevate/Top Applicant’s CEO threatens to sell borrowers’ ISAs to hedge funds, to “wreck” their credit, and to “come after” their employers. But this is all a deceptive smokescreen. Elevate/Top Applicant has generally failed to secure the licensing it is legally required to before operating as a for-profit school in the states cited in the students’ allegations. This means that in many states, Elevate/Top Applicant’s ISAs are not enforceable and are instead entirely void.

The Country’s Top Consumer Watchdog Must Act to Prevent Nationwide Fraud

Leif Technologies was the linchpin of Elevate/Top Applicant’s scheme, facilitating, servicing, and threatening to enforce Elevate/Top Applicant’s illegitimate ISAs. But Elevate/Top Applicant is hardly Leif’s only client. Leif recently disclosed that it has overseen “20,000+” originations at “200+ partner schools” amounting to “$400 million+ in arranged financing.”

As the referral that accompanies yesterday’s lawsuits outlines, the CFPB must act quickly to investigate whether the situation at Elevate/Top Applicant is typical of the school partnerships that Leif is involved in nationwide. Notably, Elevate/Top Applicant is not the only questionable school that Leif has historically associated itself with. The CFPB must use the full extent of its authority to weed out and hold Leif accountable for unfair, deceptive, and/or abusive acts and practices the company may be conducting.

Further, the CFPB should investigate whether Leif’s problems may be endemic to the ISA market as a whole. Earlier this year, SBPC was involved in a lawsuit filed against the fraudulent coding bootcamp Make School and the ISA provider it relied on at the core of its business model, Vemo Education, for deceptive and predatory conduct eerily similar to that described above. SBPC had previously cited Vemo for deceptive marketing practices. It appears that there may be an ongoing trend of shady operators turning to ISAs as a tool to profit at students’ expense with little expectation of oversight. The CFPB must act now to halt borrower harm.

Background on ISAs

ISAs are a risky form of student financing that ties students’ loan payments to their future wages. A growing body of evidence demonstrates that leading ISA providers routinely engage in a wide range of abuses—a pattern that extends across companies and across the higher education sector. Many of the abuses highlighted throughout the industry are among the allegations prominently featured in today’s complaint. For example:

  • 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.

Other examples of abuses by ISA providers include:

  • 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.

With the ISA market growing rapidly and companies in the space pushing the product ever more aggressively, consumer advocates have urged federal and state regulators to crack down on these abuses and ensure that ISA companies are acting in accordance with existing laws and regulations.

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The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

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