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In the annals of marketing, “pre-approved” ranks right up there with “free” and “low-calorie” as a term guaranteed to attract people’s attention. The FTC just announced a $3 million proposed settlement with Credit Karma for allegedly luring consumers in with deceptive promises they had been “pre-approved” for financial products, including major credit cards. The truth? For many of these offers, almost a third of the people who received a “pre-approved” offer from Credit Karma and went to the time and trouble to apply for it were denied.

Credit Karma has a consumer-facing website and mobile app where people can access credit information and find financial calculators and other resources. Credit Karma also uses its site and app to market third-party financial products, including credit cards. To use most of Credit Karma’s tools, people must sign up for an account by providing personal information, including their name, date of birth, and last four digits of their Social Security number. Credit Karma also collects additional information about them from other sources – and the company isn’t fooling about that. The complaint alleges that Credit Karma “has amassed over 2,500 data points, including credit and income information, per member.”

Beginning in 2018 and for at least three years after that, Credit Karma made “pre-approved” claims on its website, through its app, and in email marketing to consumers. For example, one email sent to people with Credit Karma accounts used the subject line “You’re pre-approved for this Amex Card.” When consumers opened the message, they saw a picture of the credit card and the assurance “you’re pre-approved.”

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Credit Karma complaint illustration

Credit Karma pushed the “you’re pre-approved” message throughout its marketing campaign, using large type, repetition, and colorful graphics. But even to the extent that Credit Karma made any purported qualifications to that express claim, the “disclaimers” were often smaller and less noticeable than the prominent “pre-approved” claim. And even if consumers read the additional text, Credit Karma assuaged concerns by using reassuring statements like “Approval isn’t guaranteed, but 90% of pre-approved applicants get this card.”

So what really happened when consumers decided to take Credit Karma up on those “pre-approved” offers? According to the complaint, for many offers, almost a third of the “pre-approved” people who applied were denied, based on underwriting review – the actual process used by the financial product companies to make actual approval determinations. What’s more, when consumers applied for credit offers, the complaint alleges that the financial entity made a “hard pull” of their credit report, which generally lowers a consumer’s credit score – hardly what consumers were expecting when they had been told they were “pre-approved.” The upshot: After wasting a significant amount of time applying for offers, many consumers found themselves without the “pre-approved” credit card or loan and with a damaged credit score that made it harder for them to get other financial products in the future.

You’ll want to read the complaint for details, but the FTC alleges that Credit Karma knew what it was doing in emphasizing the “pre-approval” claim and rejecting alternative ways to describe the offers. For example, the company conducted A/B testing to compare versions of its marketing materials and learned that the “pre-approval” claim resulted in an increase in click rates when compared to a version that told people they had “excellent” odds of approval.

Credit Karma could hardly be surprised that its “pre-approval” claims conveyed certainty to consumers. The company’s own training materials advised its customer service representatives they could expect to hear from people asking “I was declined for a pre-approved credit card offer .... How is that possible?!?!?!” Good question. As one Credit Karma employee put it, “If you are told you are pre-approved that should mean you are pre-approved. That shouldn’t mean you have a good chance. If all you have is a good chance then we should call it that.”

In addition to requiring $3 million for consumers harmed by Credit Karma’s actions, the proposed settlement prohibits the company from making deceptive claims about whether people are approved or pre-approved for a credit offer or about the odds or likelihood they’ll be approved. Once the proposed settlement is published in the Federal Register, the FTC will accept comments for 30 days.

What can other companies take from the action in this case?

The FTC will continue to illuminate dark patterns. The 2021  Bringing Dark Patterns to Light event – and multiple law enforcement actions before and since then – demonstrates the agency’s commitment to challenging interfaces, text, design elements, etc., that lure consumers into misleading transactions. The illegal methods companies use vary widely, but they all have one thing in common: They’re grounded in deception or unfairness, in violation of the FTC Act.

Time is money. Under the proposed order, the FTC will return $3 million to consumers whose time was wasted by Credit Karma’s deceptive claims. The message for other companies is that it’s bad business to entice people with misleading representations and then waste their time with an online obstacle course that doesn’t result in the advertised benefit.

Think like a customer. Bringing people in under false pretenses is likely to arouse consumer ire and attract law enforcement attention. That’s why advertisers should review their websites, apps, and marketing materials through the eyes of prospective customers. Part of that consumer-centric approach should include regularly evaluating consumer complaints and listening to what people are saying to your customer service representatives.

839 Comments


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Vivian Butler
September 02, 2022

I was a victim of Credit Karma giving me preapprovals to refinance an auto loan on my credit report and when I applied, I was denied. I stopped applying and now I disregard the preapprovals offers. My credit was checked and caused a decrease in my credit score. I expect to be compensated from the results of this lawsuit and I may stop using Credit Karma.

Collettee Rogers
September 22, 2022

In reply to by Vivian Butler

Where do we apply for the lawsuit? I went through the same as you except to build my credit back up. It dropped my score instead.

Jessica Ware
September 06, 2022

In reply to by Vivian Butler

This also happened to me. When needing a loan recently credit karma showed many pre approvals for the amount i was requesting. In turn i ended up not qualifying after being told i would be approved by credit karma

anita rincon
September 22, 2022

In reply to by Jessica Ware

how can we go about getting the funds owed to us for this situation?

richard flores
September 22, 2022

In reply to by Jessica Ware

This is crazy they told me multiple time I was approve and when I applied it was denied and my credit score was Tank. This is sad that they will do this to the customer.

Jermaine Ferguson
September 06, 2022

In reply to by Vivian Butler

I am a consumer of credit karma and also have applied for credit and was denied multiple times during that period and I applied because they said I was approved as

Shiquita Watkins
September 22, 2022

In reply to by Jermaine Ferguson

I got denied over 5 different times after being told I was pre-approved and I really hope I get compensated as well

Maria Plunkett
September 22, 2022

In reply to by Jermaine Ferguson

I too have been denied credit after being told I was pre approved.

MARY ANN SAYLOR
September 22, 2022

In reply to by Jermaine Ferguson

I am a consumer of credit karma and also applied for a credit cards and loans that stated I was pre-approved and was denied multiple times during that period of time (2018-2021)

Dareesha Thompson
September 22, 2022

In reply to by Jermaine Ferguson

Same happened with me. They’ve been getting people for years. I just stopped believing these people which sucks for the legitimate ones.

Marlene Parker…
September 22, 2022

In reply to by Jermaine Ferguson

Credit Karma has denied me and have mislead me times in telling me I pre-Qualified for credit , just for me to apply and then be denied.

Arthur Aaron
September 06, 2022

In reply to by Vivian Butler

I have used this application for one main loan,, credit cards promotions, and autoloans and was denied in 2018 and 2019 but stopped because I was rejected.. even today they have sent me approval odds for the same thing they are being sued for

Kelly Baker
September 22, 2022

In reply to by Arthur Aaron

I lost count if how many pre approvals they have sent me. To this day I still say I am pre approved for personal loans. My credit score took a hit by about 13 points over a 3 month period. My ignorance for believing the hype

Deana Julian
September 06, 2022

In reply to by Vivian Butler

I have applied for a couple of pre-approved cards and when applied got turned down and it was a hard inquiry which affected my credit score

Katie Davis
September 22, 2022

In reply to by Deana Julian

Same here. I get credit card offers, applied, got denied and a hard inquiry hit my score taking it down .

Pamela L. Furch
September 22, 2022

In reply to by Deana Julian

That happened to me also. I applied for pre-approval cards and was turned down causing a decrease in my credit score because of the hard inquiry,.

Rachel miller
September 22, 2022

In reply to by Deana Julian

I am a victim of this also. (My credit score took a huge fall) Has anyone had any trouble with one pre approved loan from credit karma sending your information to multiple sights, in result of having multiple inquiry's you didn't apply for on your credit report? I have !

Joanna bedoy
September 06, 2022

In reply to by Vivian Butler

I swear the same i get emails ive been pre-approved sign up run my credit just to be denied i started with my credit 585 dropped down to 300 and its 480 now this is insane

Gabby
September 22, 2022

In reply to by Joanna bedoy

Mine also dropped several points .. how do we do this lawsuite thing

Ricky Bandy
September 06, 2022

In reply to by Vivian Butler

Same they would constantly tell me I was already approved when I wasn’t. And all ways emailing me about new approved cards and auto loans what a joke and a hit on my credit

Robyn S Serio
September 22, 2022

In reply to by Maria Villarreal

I was a victim as well i was pre-approved for the refinance of my car, credit cards, home loans etc and then was denied which affects your credit score.

Melinda Lowery
September 22, 2022

In reply to by Maria Villarreal

I definitely was a victim of Credit Karma

Anna Byrom
September 06, 2022

In reply to by Vivian Butler

This happened to me and caused my credit score to go down because a hard inquiry. How do I park take in this.

Elizabeth Arispe
September 22, 2022

In reply to by Anna Byrom

Same scenario…. Several emails claiming I was preapproved and then denied The soft pull on my credit turned into actually hurting my score. Therefore I believe a “Hard” Pull was done. How do I file a claim?

MICHAEL BAMKOLE
September 06, 2022

In reply to by Vivian Butler

Iam a victim of the deceptive advertising for credit approval. I had applied several times only to be turn down. This ruin my credit scores and ratings

Tyshia Cherry
September 22, 2022

In reply to by MICHAEL BAMKOLE

I'm also a Victim With Thr Pre-approval and Credit Score Dropped 20 Points Even When It Said I Had Good or Great I Apply and It Won't Effect Your Credit and It Did and It Messed My Credit up

Rosemary Middleton
September 22, 2022

In reply to by kanzaydia akil…

They did the same thing to me I had a credit score of nearly 700 and now it's like 500 wish I would have known this sooner

Billy F Childress
September 22, 2022

In reply to by kanzaydia akil…

I was pre-approved for several credit cards and I was turned down losing several points on my scores.

Rupert Reid
September 22, 2022

In reply to by kanzaydia akil…

Credit karma told me I was pre approved for a credit card and I applied and was denied, causing my credit score to go down

Jacqueline
September 22, 2022

In reply to by kanzaydia akil…

I was a victim as well. I was pre-approved and waited waited given a date as to when the card would arrive and it never came. They encourage you to apply for other credit cards to improve credit but only increases debt. So very very sad in this time.

David B Goodman
September 22, 2022

In reply to by kanzaydia akil…

Been there had same thing happened to me Multiple times

Jamiee L Booher
September 06, 2022

In reply to by Vivian Butler

I received pre approval and once applied was denied and now have lower credit score. I'm done using credit karma and expect them to compensate me.

EC
September 02, 2022

Knew something was not right. Received many texts stating I had a very high chance of being approved for a credit card. I would never apply for a credit card on a site such as Credit Karma’s site. I know it’s a “marketing ploy”.

Joyce R Krueger
September 06, 2022

In reply to by EC

They did me the same way I was trying to build my credit then they Would say to apply for credit card but then if I'm denied my credit points go down now how do I sign up to try to get paid back in this lawsuit

william sullivan
September 02, 2022

on the ftc suit against credit karma if you applied for a card or a loan because credit karma said you preappoved how do get in on the law suit to be paid.

Beverly Helm
September 06, 2022

In reply to by william sullivan

Yes I would like to know how to get paid on the FTC lawsuit. Will everyone denied be compensated automatically or do we have to apply?

Phillip Yonce
September 06, 2022

In reply to by william sullivan

Few times they said I was approved and hurt my credit score would like to be compensated

Curtis Lee Sim…
September 06, 2022

In reply to by william sullivan

Credit karma said I was peaproved for credit cards and personal loans which resulted in my credit score being negatively impacted. Teey offered no help fixing this on my credit report. I thought they were suppose to help. Looking back I believed them.

yelena khaze
September 02, 2022

I love it. Its about time that they pay for false promises, when people are looking to get loans or credit card transfers from the damage to their finances a fares after COVID19.

Joseph
September 02, 2022

How do I make a claim? Because this has happened to me numerous times during this time period. And in fact, they are still doing it right now. I have proof.

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