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California raises questions over Lambda School’s ability to operate

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On Thursday, Business Insider reported that Lambda School — a hot coding bootcamp with backing from big names like Y Combinator and GV (formerly Google Ventures) — had been given a citation in July that ordered it to cease operations until and unless it properly registered with California state authorities, and that it was fined $75,000.

At the time, Lambda School CEO Austen Allred told Business Insider that it was a misunderstanding on the company’s part, and that the order is “stayed,” or given a temporary hold, while the company worked with the Bureau for Private Postsecondary Education (BPPE) to resolve the situation. “Because we’re talking with BPPE, it doesn’t affect students at all,” Allred said.

However, on Friday, Matt Woodcheke, public information officer with California’s Department of Consumer Affairs, told Business Insider that there is no stay on the order, and that if Lambda School is still operating while its registration is pending, it would be in violation of state law.

Read more: The hot Silicon Valley coding bootcamp Lambda School is paying a $75,000 fine for not registering properly with the state of California

Back and forth

According to the citation, BPPE required that Lambda School “discontinue recruiting or enrolling students and cease all instructional services and advertising in any form or type of media, including the https://lambdaschool.com and any other websites not identified here that are associated with the Institution, until such time as an approval to operate is obtained from the Bureau.”

It also must also disconnect its telephone service numbers and stop advertising, including on its website, according to the citation. As of the time of publication, Lambda School’s website was still up and still included a form where students can apply for the school.

Lambda School disputes the comments made by the Department of Consumer Affairs, and says that it can operate as per usual while an appeal to the citation is pending. Lambda School first received the citation in March, which it appealed in April.

Woodcheke says that the appeal from April was denied, and the citation was affirmed in July. He also says there is no appeal on the affirmed citation on file.

However, Cecilia Ziniti, Lambda School’s general counsel, says that its appeal is still pending, and that the company is awaiting a hearing. She said that while the citation was affirmed by an administrative chief, it has not been affirmed by an administrative judge, and thus hasn’t come into effect.

“We’re working with them and working to come into compliance,” Ziniti told Business Insider. “We’re working diligently on the application and getting some questions answered. We exepct this to resolve as quickly as we can.”

The citation

Lambda School has attracted a lot of attention for its unconventional business model: Rather than pay tuition, most students learn the fundamentals of programming for free over the internet, and then Lambda School takes a percentage of their salary for the first two years after they get a job in tech.

However, according to the citation, the issue is that Lambda School also offers the option for students to pay $20,000 for tuition, which, in the bureau’s view, means that it should have registered with the BPPE. The BPPE, which is part of California’s Department of Consumer Affairs, oversees the private higher education market in the state. While Lambda School’s programs are all online, it’s headquartered in the San Francisco Bay Area.

Woodcheke also said that Lambda School has yet to pay the $75,000 fine, which already came due. That’s because Lambda School first received the citation in March, which it appealed. However, he says, the citation was upheld, of which Lambda School was informed on July 24th, according to the BPPE.

Ziniti says the fine is not due, thanks to its pending appeal. Again, however, the BPPE says that while it recognizes that Lambda School appealed the original citation in March, the fact that it upheld the citation in July means that this fine is due.

“Ideally we want these schools to be in compliance, and we hope Lambda completes that process,” Woodcheke told Business Insider.

Earlier this week, Allred told Business Insider that he welcomed the BPPE’s oversight.

“We’re happy to be regulated,” Allred said at the time. “We’re happy to work with regulators. We’re not trying to be one of those companies that avoids regulation. It makes a lot of sense when schools are regulated when they charge tuition so we’re happy to comply.”

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