Tech bootcamp students are suing over income-share agreements

Their lawsuits allege they were tricked into repayment agreements for a program they say didn’t teach them anything substantial.

 A diploma illustrating criticisms of income share agreements

Two former students allege they were misled on the terms of the ISAs in order to join a 10-week online tech sales bootcamp.

Image: Christopher T. Fong/Protocol

Two former students filed separate lawsuits Thursday against tech sales bootcamp Top Applicant, which also does business as Elevate, as well as income share agreement provider Leif Technologies, alleging the school tricked students into joining and left them with large debts to pay to the ISA provider.

One lawsuit was filed by Fanxin (Amy) Zeng in King County Superior Court in Washington state and another was filed by Justin Chi in the Central District of California.

With income share agreements growing in use by students, state and federal regulators have been scrutinizing these contracts and examining whether they should be classified as loans, with the same protections as other forms of consumer debt.

The former students allege they were misled to think they were applying for jobs and misled on the terms of the ISAs in order to join a 10-week online tech sales bootcamp for “sales development representatives.” But the lawsuits allege that the students did not learn much while being tracked into entry-level jobs that didn't need training — and then faced harassment to pay back high debts.

Elevate students can pay cash up front or enter into income share agreements, but the plaintiffs said they were tricked into signing up for ISAs, which require payment based on a percentage of the borrowers’ salaries rather than set principal and interest payments.

Top Applicant and Leif could not be reached for comment.

In a striking look at how ISAs work, Zeng’s lawsuit also alleges deceptive and threatening collection practices involving Top Applicant’s CEO and COO. According to the lawsuit, one collection email from Top Applicant CEO Norman Rodriguez starts off:

I understand that you would prefer to simply disappear on us now that you're comfortable in a role. Sadly, you really can't ghost your way out of a financial contract, this isn’t a tinder date you are one and done with.
There are two ways this can go from here.
1) You man up, swallow your pride and embarrassment and contact us to ensure you are in compliance with your Leif contract and make clear you intend to pay the ISA as agreed upon.
2) You don’t step up to the plate and hope this inconvenience just disappears. In that case, we will sell the right to your ISA to a hedge fund that specializes in distressed assets. They will sit on it and do nothing for a while because they know that you probably haven’t read it and don’t realize that if you remain maliciously out of compliance for a period of time, you then simply owe 100% upfront instead of 10% of your income for X months. Then they will come after you and your employer, as well as wreck your credit score for at least a decade and a half…”

Zeng had originally responded to a job post by Elevate on LinkedIn, thinking she was applying for a job, her lawsuit alleges. Zeng then received an email saying she had earned a seat as one of the “top 10% of applicants,” and was given a link to apply for an ISA through Leif, making the ISA seem like a part of applying for a position before enrolling in Elevate, according to the complaint.

Ten days after receiving the Elevate email, she received another job offer without Elevate’s help, the complaint states. The next day, she accepted it. Zeng told Elevate she didn’t want to enroll, but an Elevate representative convinced her not to withdraw, the lawsuit says. When she started the program, she realized it was not helpful, so she withdrew, she said in her complaint.

But Elevate still tried to collect 10% of her income for three years, the lawsuit states.

Zeng’s lawsuit alleges that Elevate’s agreements contain terms that violate Washington laws, such as not having a “uniform statewide cancellation and refund policy,” the lawsuit states.

Chi’s federal lawsuit alleges that Elevate and Leif violated the Truth in Lending Act and the Rosenthal Fair Debt Collection Practices Act, among other allegations. Melody Sequoia, an attorney representing Chi, said the companies’ practices were “fundamentally unfair and illegal.”

Elevate promises students will earn $60,000 on its website: "We’re so confident in our program that we guarantee you land a $60k+ job within the first year of completing Tier 1."

Elevate also says on its LinkedIn profile that Elevate doesn't get paid unless students land a role "making over $60,000" a year. However, Elevate contracts obtained by the Student Borrower Protection Center and reviewed by Protocol show payments due if students make $40,000 a year.

Chi’s lawsuit says Elevate’s LinkedIn job listing offered “a base salary of $60,000-$82,000, with dental, vision and medical insurance.”

Chi was still required to pay back the ISA provider Leif even though he found a job that he applied for before attending the bootcamp, his lawsuit alleged.

“The program curriculum was non-existent or underdeveloped and was essentially a guided job hunt. Indeed, because a SDR position is entry level, no training was actually needed to find a job in the industry,” the lawsuit states.

Elevate is not licensed to operate by the state of Washington’s private vocational school regulator, so the ISAs that Top Applicant issued are “unenforceable by law,” the lawsuit alleges. Critics of ISAs have raised questions in other cases about whether the agreements are valid loans and argued that if they aren’t, then ISA issuers shouldn’t be able to collect on them.

Chi’s lawsuit also alleges that Top Applicant’s ISAs are not enforceable because the company is not authorized to operate in California; it seeks to stop Top Applicant from collecting on its ISAs with California borrowers.

Top Applicant Inc. is a Delaware corporation; Elevate does not appear to be a registered business name. Elevate says in its LinkedIn profile it is a San Francisco company, but Top Applicant’s headquarters is in Arizona, according to the Arizona Secretary of State website. A filing with the state of California also shows an Arizona mailing address for Top Applicant, and Top Applicant CEO Norman Rodriguez lists his location as Arizona on LinkedIn.

The Student Borrower Protection Center, which provided documents to Protocol and supported the lawsuits, said it has sent information about the cases to the Consumer Financial Protection Bureau, which has shown intense interest in how a variety of new consumer-lending practices affect consumers.

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