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Isn't lying to trick people for financial gain to their detriment fraud? > Fraud is an intentionally deceptive action designed to provide the perpetrator with

Isn't lying to trick people for financial gain to their detriment fraud? > Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud. Fraudulent activity can be carried out by one individual, multiple individuals or a business firm as a whole. Seems to me like lying on this contract should constitute fraud.

pbreit 6y ago
Not clear to me that they were lying. Also not clear they had anything to gain.
- DangitBobby 6y ago
  My reading of it is that their contract claimed student debt with the school could not be discharged with bankruptcy similar to federal student loans. This is not true, and it's doubtful that the people writing the contract didn't know that it wasn't true. If they were being intentionally deceitful, which I believe is the claim here, it would be to prevent loss of loan-repayment in the case that a student finds the debt to be too burdensome and wishes to instead file for bankruptcy. Why else would they include it in the contract if it weren't to their benefit to discourage the student from discharging their debt? All that's left is to prove the intent to decieve.
  - imgabe 6y ago
    But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. So why would they go about trying to collect loans from people declaring bankruptcy when they already give up on loans in other circumstances where they would be much easier to pursue? It seems like Lambda was just genuinely confused about what the regulations were regarding their loans and whether they could be discharged in bankruptcy. The regulator clarified that they could, and they updated their agreement to reflect that.
    - dragonwriter 6y ago
      > But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. No, it doesn’t, ever, for the California Retail Installment Contract at issue. Their ISA, defers for five years and then discharges.
      - pbreit 6y ago
        I think you're right. The California regulator forced Lambda to make the agreement much worse for California students. Can we fine the regulator (which is totally useless, btw)? https://www.forbes.com/sites/prestoncooper2/2020/08/21/california-greenlights-income-share-agreements-but-with-a-caveat-that-will-hurt-students/?sh=ad38e9970022 https://www.forbes.com/sites/prestoncooper2/2020/08/21/calif...
      - imgabe 6y ago
        What does it mean that it defers for five years and then discharges? To me, defers means you are not required to make payments during that time. Discharges means that the obligation is removed and you never have to make any payments. So...if you go five years without getting a job that makes 50k, the ISA defers ... and is then discharged? You never pay it back? How is that different from what I said?
        dragonwriter 6y ago
        > How is that different from what I said? Its different from what you said (or alternatively, what tou said is a nonsequitur to the discussion of the article, hard to tell which) because it applies only to their ISA, which for legal reasons isn’t used in California and is not what they are in trouble for lying about. They are in trouble for misrepresenting the Retail Installment Contract, which is used exclusively in California, and which is deferred when income is under $50K, but is never discharged/forgiven except by full payment.
        imgabe 6y ago
        So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? Sounds very California.
  - pbreit 6y ago
    Treatment of student loans in bankruptcy not limited to government loans. The clause makes Lambda appear less attractive so not clear why it would be included. Would be nice to hear Lambda’s side.
    - dragonwriter 6y ago
      > The clause makes Lambda appear less attractive so not clear why it would be included. It’s designed to dissuade people from seeking bankruptcy to discharge the debt.
      - pbreit 6y ago
        I doubt it. Who would seek bankruptcy for 17% of their salary? And it also make Lambds FAR more unattractive.
        kelnos 6y ago
        The problem is if you can't get a job above a certain salary threshold. While Lambda's non-CA contracts allow for discharging the debt after 5 years of no job or low enough salary, it seems their contract for CA students does not allow for discharging the debt, ever. Regardless, people don't necessarily go into bankruptcy over a single loan. It could be the combination of credit card debt, a mortgage, a car loan, plus the Lambda loan that puts them over the edge.
- BoiledCabbage 6y ago
  > also not clear they had anything to gain. Getting people to pay back loans they aren't required to pay back "isn't something to gain?". I'm trying to find a charitable reading of this but am struggling. In what way do you think they have nothing to gain?
  - pbreit 6y ago
    Makes Lambda look FAR less attractive up front. You’re only paying back a small percentage of income and that’s IF you are even employed, so it’s not clear how you would be thinking of going into bankruptcy to discharge this loan.
- nl 6y ago
  > Also not clear they had anything to gain. The resell the debt to investors[1]. If students think these debts have to be repaid even if they don't then they are more valuable so yes, the school has something to gain. [1] https://inside.com/campaigns/inside-dev-2020-02-13-21344/sections/lambda-school-reselling-students-income-share-agreements-isas-to-investors-178714 https://inside.com/campaigns/inside-dev-2020-02-13-21344/sec...
  - pbreit 6y ago
    They don't resell all the debt. And this make Lambda FAR less attractive. And if someone is going into bankruptcy it would be over far more than 17% of their salary. In which case they would find out if it's dischargeable or not.
    - PKop 6y ago
      >And this make Lambda FAR less attractive This is only relevant if the revenue lost from those that don't sign up out of fear of not being able to pay back the loans, exceeds the number of students who do sign up and would seek bankruptcy if it was dischargeable but don't having been told it isn't. Just like the student debt problem in general, I'd imagine most students seeking to attend the school are optimistic they can pay it back, whether this ends up being true or not, so this proposed effect is minimal. Also, some portion of those that wouldn't sign up out of fear of un-dischargeable debt, would, if it was dischargeable, not end up paying back some of this debt to Lambda School. So earning their trust as customers isn't much of a net benefit. Putting all of these points aside, why did they do it? If it made their school overall less attractive to a point of diminished revenue, this would have been doubly stupid as it added regulatory risk since they were violating a law. Common sense tells us they were doing it because they saw it as beneficial.

pbreit 6y ago

Not clear to me that they were lying. Also not clear they had anything to gain.

DangitBobby 6y ago
My reading of it is that their contract claimed student debt with the school could not be discharged with bankruptcy similar to federal student loans. This is not true, and it's doubtful that the people writing the contract didn't know that it wasn't true. If they were being intentionally deceitful, which I believe is the claim here, it would be to prevent loss of loan-repayment in the case that a student finds the debt to be too burdensome and wishes to instead file for bankruptcy. Why else would they include it in the contract if it weren't to their benefit to discourage the student from discharging their debt? All that's left is to prove the intent to decieve.
- imgabe 6y ago
  But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. So why would they go about trying to collect loans from people declaring bankruptcy when they already give up on loans in other circumstances where they would be much easier to pursue? It seems like Lambda was just genuinely confused about what the regulations were regarding their loans and whether they could be discharged in bankruptcy. The regulator clarified that they could, and they updated their agreement to reflect that.
  - dragonwriter 6y ago
    > But Lambda already forgoes loan repayment if the student doesn't get a job making at least $50k. No, it doesn’t, ever, for the California Retail Installment Contract at issue. Their ISA, defers for five years and then discharges.
    - pbreit 6y ago
      I think you're right. The California regulator forced Lambda to make the agreement much worse for California students. Can we fine the regulator (which is totally useless, btw)? https://www.forbes.com/sites/prestoncooper2/2020/08/21/california-greenlights-income-share-agreements-but-with-a-caveat-that-will-hurt-students/?sh=ad38e9970022 https://www.forbes.com/sites/prestoncooper2/2020/08/21/calif...
    - imgabe 6y ago
      What does it mean that it defers for five years and then discharges? To me, defers means you are not required to make payments during that time. Discharges means that the obligation is removed and you never have to make any payments. So...if you go five years without getting a job that makes 50k, the ISA defers ... and is then discharged? You never pay it back? How is that different from what I said?
      - dragonwriter 6y ago
        > How is that different from what I said? Its different from what you said (or alternatively, what tou said is a nonsequitur to the discussion of the article, hard to tell which) because it applies only to their ISA, which for legal reasons isn’t used in California and is not what they are in trouble for lying about. They are in trouble for misrepresenting the Retail Installment Contract, which is used exclusively in California, and which is deferred when income is under $50K, but is never discharged/forgiven except by full payment.
        imgabe 6y ago
        So basically, California specifically forced them to create a special contract, different from the one they use everywhere else, that couldn't be discharged and then censured them for not clearly enough stating that the special California contract couldn't be discharged? Sounds very California.
- pbreit 6y ago
  Treatment of student loans in bankruptcy not limited to government loans. The clause makes Lambda appear less attractive so not clear why it would be included. Would be nice to hear Lambda’s side.
  - dragonwriter 6y ago
    > The clause makes Lambda appear less attractive so not clear why it would be included. It’s designed to dissuade people from seeking bankruptcy to discharge the debt.
    - pbreit 6y ago
      I doubt it. Who would seek bankruptcy for 17% of their salary? And it also make Lambds FAR more unattractive.
      - kelnos 6y ago
        The problem is if you can't get a job above a certain salary threshold. While Lambda's non-CA contracts allow for discharging the debt after 5 years of no job or low enough salary, it seems their contract for CA students does not allow for discharging the debt, ever. Regardless, people don't necessarily go into bankruptcy over a single loan. It could be the combination of credit card debt, a mortgage, a car loan, plus the Lambda loan that puts them over the edge.
BoiledCabbage 6y ago
> also not clear they had anything to gain. Getting people to pay back loans they aren't required to pay back "isn't something to gain?". I'm trying to find a charitable reading of this but am struggling. In what way do you think they have nothing to gain?
- pbreit 6y ago
  Makes Lambda look FAR less attractive up front. You’re only paying back a small percentage of income and that’s IF you are even employed, so it’s not clear how you would be thinking of going into bankruptcy to discharge this loan.
nl 6y ago
> Also not clear they had anything to gain. The resell the debt to investors[1]. If students think these debts have to be repaid even if they don't then they are more valuable so yes, the school has something to gain. [1] https://inside.com/campaigns/inside-dev-2020-02-13-21344/sections/lambda-school-reselling-students-income-share-agreements-isas-to-investors-178714 https://inside.com/campaigns/inside-dev-2020-02-13-21344/sec...
- pbreit 6y ago
  They don't resell all the debt. And this make Lambda FAR less attractive. And if someone is going into bankruptcy it would be over far more than 17% of their salary. In which case they would find out if it's dischargeable or not.
  - PKop 6y ago
    >And this make Lambda FAR less attractive This is only relevant if the revenue lost from those that don't sign up out of fear of not being able to pay back the loans, exceeds the number of students who do sign up and would seek bankruptcy if it was dischargeable but don't having been told it isn't. Just like the student debt problem in general, I'd imagine most students seeking to attend the school are optimistic they can pay it back, whether this ends up being true or not, so this proposed effect is minimal. Also, some portion of those that wouldn't sign up out of fear of un-dischargeable debt, would, if it was dischargeable, not end up paying back some of this debt to Lambda School. So earning their trust as customers isn't much of a net benefit. Putting all of these points aside, why did they do it? If it made their school overall less attractive to a point of diminished revenue, this would have been doubly stupid as it added regulatory risk since they were violating a law. Common sense tells us they were doing it because they saw it as beneficial.