Three students sue Lambda School coding bootcamp alleging bogus ads and financial shenanigans – TechCrunch

Lambda School attracted a lot of attention and raised a few $ 130 million in venture capital among an impressive list of investors, for its innovative approach to teaching coding: offers six-month virtual computing courses for $ 30,000, with the option to pay for the courses in installments on a one-to-one basis. sliding scale that only starts after getting a job makes at least $ 50,000.

But it turns out that the startup is also causing a lot of controversy. In the latest development, three students filed lawsuits against the company in California, citing deceptive financial and educational practices.

The costumes – which are brought by the non-profit association National Student Legal Defense Network on behalf of Linh Nguyen, Heather Nye and Jonathan Stickrod – date back to a period between 2018 and 2020, and they focus on four basic claims.

First, this Lambda school has falsified and distorted placement rates. Second, the Lambda School has distorted the true nature of its financial interest in student success (in particular, there are question marks about how Lambda manages its ISA contracts and if it benefits from them). Third, he twisted and covered up a regulatory dispute in California that forced the school to shut down. And fourth, that he registered and provided educational services and signed ISA contracts in violation of that order.

The documents filed for the three cases are incorporated below.

The three students are currently all obligated to pay their Lambda tuition fees, which they have chosen to repay in installments through the school’s Income Sharing Agreement (ISA) model. The lawsuits do not reveal how much the three people are claiming for damages.

To those who have been following the Lambda School news for the past several years, the claims detailed in the lawsuit will sound familiar.

the inflated placement rates; and the fact that he was not legally authorized to operate, but still accepted students, signed ISA agreements, and taught, for example, were all reported during this time, along with other criticisms of how self-proclaimed CEO and founder Austen Allred.growth hacker“, used his other Twitter accounts and those of Lambda to create a buzz about the school.

Some of the issues raised in the lawsuits have also since been resolved. For example, the prominent display of over 80% of job search students is no longer on the Lambda site, and in California you no longer get an ISA but a retail contract (similar but different). But as with litigation, litigation based on past issues of people affected by it while still active is, in many ways, the next logical and unsurprising step.

There is also a specific strategy behind these three files filed at the same time.

Alex Elson, co-founder of the National Student Legal Defense Network, told TechCrunch in an interview that the ISA contracts students sign at Lambda contain arbitration clauses that prevent students from arbitrating against Lambda as a group, that is, that is, class actions.

The idea is that by bringing three nearly identical individual cases against the school simultaneously, defendants can both expose widespread Lambda practices and pave the way for broader relief for others affected in the same way. . (The Student Defense Network’s co-counsel in this case is CalebAndonian PLLC and Cotchett, Pitre & McCarthy LLP.)

Initially incubated at Y Combinator and backed by a long list of investors that include GV (Google Ventures), Gigafactory (former Founders Fund partners), GGV and more, Lambda School has had some tough times over the past year, a period that saw the COVID-19 pandemic disproportionately impacting some parts of the economy but not others.

Edtech has been widely seen as an area of ​​huge growth, but that may not have been the case for edtech startups specifically focused on tech and professional jobs, as the tech world has seen many freezes. hires and layoffs, as companies seek to cut costs in the face of the unknown.

Lambda crossed two games of layoffs within a year, and it appears that in one of them, he also changed his teaching model, removing TLs (team leaders), the paid mentors who helped assess students , and instead moved to a model where students mentored and assessed themselves.

It also changed the courses themselves, shortening them to six months from their original nine and 18 month formats, but without reducing the prices of those courses.

And it’s not quite past all of its regulatory issues either.

Just two weeks ago, the California Department of Financial Protection and Innovation (DFPI) announced a regulation with the school on the language it uses in financing contracts with students.

Specifically, the DFPI took issue with how it said Lambda falsely described its financial deal with students as a “qualified educational loan … subject to the discharge limitations contained in … the United States Bankruptcy Code”.

(Educational loans are generally exempt from discharge from bankruptcy – when a debtor is not required to pay a debt because that debtor is bankrupt, it is a discharge from bankruptcy; typically, educational loans are not covered by this, so the problem here was that the Lambda school claimed that even if a student files for bankruptcy, they will still have to pay Lambda back.)

“The language violates California’s new Consumer Financial Protection Act (CCFPL), which came into effect this year and prohibits companies from engaging in illegal, unfair, deceptive or abusive practices,” DFPI noted.

The regulation requires Lambda to notify students that the wording of the bankruptcy discharge provision is not accurate; retain the services of a third party to review the terms of the school funding contract to ensure that it complies with all applicable laws; and undergo a review of its marketing materials to ensure that the information is accurate and is not likely to mislead consumers.

You could say that all of these issues are the table stakes of being a startup and trying something new: the school moves quickly, breaking things up and iterating along the way to figure it all out.

But for a service that can force students to pay back $ 30,000, it’s a big price for others to pay when these things don’t work quite as advertised.

Yet despite all of this, Lambda also continues to have a lot of supporters and partners. Last month, for example, he announced a new backend engineering program he developed with Amazon. And while he doesn’t seem guaranteed that taking the course will instantly open the door for you to a job at the tech giant, this is a sign of how it remains interest in Lambda’s big idea.

We’ve also reached out to CEO and Founder of the Company, Austen Allred, and the Company itself, for a response and will update this post as we learn more.

Updated with Lambda’s response below, along with a Allred blog post.

In accordance with the policy, we do not talk in detail about the individual situations of students or alumni, but of course we are happy to look into matters directly and will look into any cases that are filed. Typically, however, for any student’s ISA payments to be activated, they would first have signed an ISA contract and then landed a role leveraging the skills learned at the Lambda School that pays $ 50,000 or more in salary.

Our mission is to reduce the risks associated with education and expand access to better paying jobs. For this reason, our ISAs (and RICs in California) are designed with policies that are as flexible and student-centered as possible. This includes our voluntarily generous pro-rata refund policy and our pro-rata policy for students who decide to exit the program, regardless of how tuition is paid. In addition, if a former student loses their job, salary, or earns less than $ 50,000 per year, their payments are immediately suspended. ISAs expire completely after 24 payments or 60 months deferred, even if the total paid is less than $ 30,000.

Our number one priority is student success. We stand behind the quality of our instructors and our proven student results (which we detail in more detail here and in our results reports). While we always strive for our students and alumni to have a positive experience and achieve their career goals, we are also willing to work with individuals and review cases to reach a resolution.

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