[Software] Lambda School, a coding bootcamp that takes a cut of your next tech salary, now takes a 30% cut in staff.

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The Lambda School, an online coding bootcamp based in San Francisco, on Thursday said it will lay off 65 employees, about a third of the workforce.

The staff cuts follow a settlement announced earlier this week with the California Department of Financial Protection and Innovation that requires the school to remove deceptive language from its student contracts.

The department argued that the school's contract with students violated the California Consumer Financial Protection Law, which took effect at the beginning of the year and was enacted in response to predatory financial practices following from the COVID-19 pandemic.

Lambda School offers students the option to finance tuition by deferring payment until after they graduate and get a job, whereupon they're contractually obligated to repay the cost of their education from their salary.

The school's Income Share Agreement (ISA) with students falsely stated that the amount owed constituted a "qualified student loan" that would persist as an obligation even if the student declared bankruptcy.

That's not the case and Lambda School has agreed to have its financing contracts reviewed for legal compliance and to correct misleading marketing claims.

ISAs have become a po[CENSORED]r repayment scheme in recent years and are offered by several dozen colleges and bootcamps. But unlike loans, where the law recognizes specific rights for borrowers and creditors, ISAs have no legal definition beyond the fact that they're contracts.

"ISAs are financial products, drafted by lawyers, often structured to provide an attractive return on the investment of funders or private investors," wrote Senator Elizabeth Warren and Congressional Reps. Ayanna Pressley and Katie Porter in a June, 2019 letter [PDF] to then Secretary of Education Betsy DeVos. "They carry many common pitfalls of traditional private student loans – with the added danger of deceptive rhetoric and marketing that obscure their true nature."

The lawmakers expressed concern that ISAs contain exploitative terms, like mandatory arbitration agreements and class-action lawsuit bans, and they're not subject to oversight by financial regulators.

One month later that year, a bipartisan group of US Senators proposed a bill titled "ISA Student Protection Act of 2019" to better define the legal parameters of ISAs. It contained impoverishment safeguard provisions like a minimal income level below which ISA payees would no longer be obligated to pay a percentage of their salaries. But the legislation never received a vote.