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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.

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Nejaya Moore
September 14, 2022

I was a victim whenever I've applied for a loan.

Shannon DeFehr
September 14, 2022

I was told I was pre approved for a refinance loan thru several companies when I applied for them I have several hard inquiries and it damaged my credit score same with a couple of credit cards same thing not approved.I also was approved for 2 ads that state no yearly fee come to find out they lied and know are charging me 96.00 dollars each card before I even a tivate or use it and them they ding my credit and turn me into a collections to this day I still have the credit offers when I open my credit karma account so definitely want it taken of my credit report want to close the cards that are charging me 96.dollar fee and have my score fixed and credit report changed and my info they compromised
Thank you

Konfena Simpson
September 14, 2022

Yes! I am a victim of this. They told me that my odds we’re great my credit score was 679 and 674 of the running those credit cards my credit score is now at 554

Robert Kenebrew
September 14, 2022

I was a victim of this as well. I worked extremely hard to raise my credit score, only to have it drop after applying for cards that credit karma said would help raise my credit score

Chad briggs
September 14, 2022

this happened to me too on credit cards , and for auto refinance and took my credit score down to the point I couldn't get my loan refinanced though any providers

Isaiah Rideout
September 14, 2022

Same happened to me I thought I was being racially profiled but I guess this is what it was ..they also trick consumers into bad credit card rates and deals ..

FTC Staff
September 15, 2022

In reply to by Isaiah Rideout

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at www.ReportFraud.ftc.gov. After the settlement is final, the FTC will publish updates on www.ftc.gov/refunds. Don’t pay anything or give personal information to someone who offers to help you get a refund.

Terry jenkins
September 14, 2022

I applied for 10 or more that said I was pre approved And my score kelp dropping and one of the resins was to many hits for credit and they say it could take up to 10 years to fall off my report

Angie R
September 14, 2022

I’m so glad this was brought to someone’s attention! As you go through life working through difficult seasons, you don’t need things like this causing you to intentionally fall and cause more harm.

Michael Rogers
September 14, 2022

Offers got to a point were the denials were unreal to be pre approved only then I noticed inquiry on my credit for those card notice a decrease in my credit score....

Rochelle Dale
September 14, 2022

I downloaded the Credit Karma App and used it to check my credit score. I wanted to utilize suggested ways to improve my score. They recommended a credit card as a way to make timely payments that would impact my score in a positive way. Great, sounds good. I applied for numerous cards and was denied for literally every one of them. I gave up after that. Later on I found a car lot that would work with my credit score and applied for a loan through their bank. My credit report was pulled up and they claimed I had multiple inquiries and checks into my credit on my report. They saw that in a negative light and my payments were made to be significantly higher per month. The way they made it sound was that they were easy credit cards to get and were made for people like me who wanted to inch their way back into good credit standing with easy payments on a credit card. Instead it cost me more in the long run due to all their inquiries into my credit report.

Tara Nollau
September 14, 2022

I was also a victim of this??

Amanda Botts
September 14, 2022

They told me over and over i was pre-approved for loans and credit cards them my score drop over 100 points

Hendrick Rodriguez
September 14, 2022

I was a victim of this. I need my credit repair on them

Angela Robinson
September 14, 2022

How do we make a claim I have been a victim of this several times

Cornell Johnson
September 14, 2022

I too was a victim of this. It has helped in the since of being able to see my score for free, but for all the times it said my "approval odds were excellent", every single one of those times, I was denied and it dinged my credit

David Welch
September 14, 2022

Over the last few years, I was dumb enough to apply several times. SMH! No joke! My question is how will they know to help out? Maybe by records from Credit Karma! Talk about karma coming back on credit karma

Elizabeth Whitworth
September 14, 2022

I fell victim to this pre approval as well. Many times. And took hard hits on my credit each time I applied and was ultimately denied. I strongly agree with some type of compensation!

Milton Matos jr
September 14, 2022

Yup, got me at my lowest of times.. and took my score lower into the pits. Literally did the opposite, of my intentions for opening a high interest credit card.. how will I know if Im receiving compensation?

Rebecca Benedict
September 14, 2022

I got so many pre approvals and not a single one worked out I was in a time of need to instead I had to sell my belongings.

Andrea flores
September 14, 2022

I have a credit karma and they pre approved me for credit cards as well. On the credit karma my credit score says one thing and when I “thought” I was approved it showed a whole different score. This has me furious

Patty Waters
September 14, 2022

I was also a victim of Credit Karma’s pre-approved credit cards…I have gotten several pre-approved credit card offers with supposedly no hard inquiries but I was turned down for all with my credit score affected…

Lori
September 14, 2022

It told me I was pre-approved but then I didn’t get it and it affected my score. Where do we submit a claim?

Aaron Burns
September 14, 2022

I applied for several credit cards and personal loans through credit karma. I was trying to get a capital one card because credit karma said my odds were outstanding. I was denied all 3 times I applied. The worst was the personal loans though. It sent out my info to every lender in the world and they did several hard pulls and my phone still doesnt stop ringing. Email inbox filled with tons of spam.

Danielle Bartlett
September 14, 2022

... also a victim of Credit Karmas bait and switch scam.

Manuel Garcia
September 14, 2022

I too was a victim of credit karma was in a pickle and ended up hurting my credit score.. how do I submit a claim?

Deb W.
September 14, 2022

I've been applying for personal loans and credit building credit cards for as long as I can remember on credit karma and not once have I ever been approved. I hope I get at least $2000 back for CK scamming people!

Celia Jenkins
September 14, 2022

Same thing happened to me credit karma gave me preapprovals for loan and credit card that was denied

Yvette Richter
September 14, 2022

I was also a victim, it's discouraging to think you've been pre-approved and you weren't. After a hard inquiry and rejection, you just want to give up trying.

Paul Lindsley
September 14, 2022

How will I get funds for this. Will they put an unspecified amount in everyone's checking account. Because these guys have done this to me 20 times

Samuel sheppard
September 14, 2022

This also happened to me I didn’t understand why I got denied when I was pre approved .

Paul Lindsley
September 14, 2022

How do we get our money?

FTC Staff
September 15, 2022

In reply to by Paul Lindsley

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at www.ReportFraud.ftc.gov. After the settlement is final, the FTC will publish updates on www.ftc.gov/refunds. Don’t pay anything or give personal information to someone who offers to help you get a refund.

Paul Lindsley
September 14, 2022

Do we have to put our name in somewhere.

Sophia Shoot
September 14, 2022

I was a victim to this! Credit Karma’s advice to me was to boost my score get pre approved with one of their recommended credit cards but all that did was the opposite and I wasn’t approved.

Dina w
September 14, 2022

How do I get in touch with someone because they scammed me multiple times I would get notifications r a email telling me I’m pre approved for a credit card n got denied every time n it messed up my credit score they also shut down my checking account I had with them for no apparent reason I barely use it N this was about 2wks ago maybe it’s because they know what they did to me

Amanda wilson
September 14, 2022

I also was contacted by credit karma with an email stating I had been preapproved for Loan and card offers In 2021. After applying for these loans and cards my score dropped dramatically, Even though there was a statement about not hurting my Score. I'm still trying To fix The damage done by applying to these offers. I only joined credit karma because I wanted to buy a house and had no credit at all. Now I have to take the time to fix my score it's my score before I even can apply for for a home loan.

Shanteria Edelen
September 14, 2022

I was definitely a victim and every single time even when the odds said OUTSTANDING I would still get denied next thing you know I have a hard inquiry on my report I was so mad my score dropped 29 points for that and I was scared to do it again on another one of the cards literally last night 9/7/2022 and guest what I was denied. Then my chances for a small loan for one main financial guess what outstanding verdict but as you can guess DENIED so done with them now

taylor newsome
September 12, 2022

i too was a victim of credit karma, i have used this application for a personal loan at one main loan,, credit cards promotions, and autoloans and even mortgages was denied in for all 2018and 2019 ,2020but stopped because my application was denied .. even in today present time credit karma have sent me approval odds for the same thing they are being sued for doing

Marcus H. Spears
September 12, 2022

They also denied me pre approved credit cards and thru a loan service where you had to pay for the credit check fromCredit Karma who denied me multiple times.

Azma Magee
September 12, 2022

I want to know how to file a claim, credit karma did this to me on several occasions with credit cards, personal loans and refinancing my vehicle. ITS MY MONEY AND I WANT IT NOW!!!!!

FTC Staff
September 13, 2022

In reply to by Azma Magee

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at www.ReportFraud.ftc.gov. After the settlement is final, the FTC will publish updates on www.ftc.gov/refunds. Don’t pay anything or give personal information to someone who offers to help you get a refund.

Marcus Spears
September 12, 2022

They denied me multiple times with the pre approved credit cards. Credit Karma also denied me for a loan application and charged for a free trial of your free credit report .

Nicole Williams
September 12, 2022

Please add me to the list

Christina Cameron
September 12, 2022

I applied for a Capital One card to raise my credit score so we can buy a house with good credit, over 700, got a pre approved Capital one message on my app and i applied. Got denied after giving all my information and have the Hard inquiry on my credit now hurting my score under 700 now... how do i apply for the claim? Or can i just get them to remove my hard inquiry??

Susie Badillo
September 12, 2022

I was hit hard in my credit score from credit karma from credit card approval that I signed up for but I was denied after credit karma said I was approved basically they gave me false information and I got hit hard on my credit score I don’t think this is right that they did this please help and get me compensated from this lawsuit thank you

Kevin Aekins
September 12, 2022

I was deceived many times by these promotions. I was lead to believe I was pre-approved. I went online, applied and denied. And now I'm finding out that my scores were damaged each time I applied. This is horrible.

Michael Ward
September 12, 2022

I myself in a victim I was pre-approved for a credit card denied two times and the car loan that hurt my credit bad when I thought that pre-approvement that you were approved pretty much now I'm like so scared to even attempt to apply for a credit card or a loan that it's not funny I don't need my credit to go down anymore than it already has I think I should be compensated myself but I probably won't that's the way things work but we'll see if anybody gets a hold of me about it

Michael Ward
September 13, 2022

I too and victim pre-approved for three credit cards got denied couple loans not denied car loan and I and all of them said that it wouldn't hurt my credit score but they did and it did hurt my credit score I'd like to know my credit karma would do that to people cuz I think they owe me something for lying to me

Ray
September 12, 2022

I too was a victim of this! How do we get added to this lawsuit