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$3 million FTC settlement disapproves of Credit Karma’s deceptive “pre-approved” claims
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 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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My credit score was also negatively impacted by their predatory pre approved offers only to find out I was denied time and time again. Where’s my money for pain and suffering?
I applied for multiple pre-approved cards that ultimately denied a line of credit and reduced my score. They even send emails suggesting new cards could help your score only to reduce ot and not be approved.
This happened to me too.
I can’t tell you how many times I’ve applied for a credit card and a loan because I he a high approval odd and didn’t get approved. The history of my score going up and down shows that Credit Karma was definitely the reason for the changes. It’s upsetting!
Credit karma did same to me!
Same thing happened. Are there any next steps we should take?
How do I submit a claim?
In reply to How do I submit a claim? by Nazrul Babu
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.
This also happened to both my husband and myself, when we applied for personal loans and credit cards. I think it's horrible that a company that people depend on to help them in their time of need would dupe them so horrendously!
I too am a victim to Credit Karma. I would get suggestions that a new credit card or loan could help my credit scores
Credit Karma is STILL DOING THIS!! Even with the lawsuit!! I actually have decent credit and made the mistake on clicking “you have excellent odds” on a card that I was then denied for. Hit my credit by that afternoon. So apparently this lawsuit didn’t phase then one bit!
I fell for this a few times. I worked hard to get my score up and thought a boost from a pre approved credit card would help which resulted in denial and score drop. I always said why would you offer something I'd get denied for and just brushed it off. Credit Karma should back us for damages!
Yes they got me several times with there false approval my credit is worse now
I was pre approved and denied too
In reply to I was pre approved and… by Demetrius wilson
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.
They absolutely suck you in to thinking you can get a card or personal loan. Terrible company. Waste of time dealing with them. Reimbursement is definitely the right move.
Victim also, please let us know how to get involved. They have ruined my score from these shady practices.
I have been a victim of this multiple times over the past few years.
Credit Karma has falsely pre approved me many times stating I was pre approved and really wasn't and hurt my credit score.
Same thing happened to me. Credit Karma said you were preapproved and then I was denied.
This is something I always toldy wife why is credit Karma saying I'm pre approved for a car loan and a credit card when it's not true then after I apply I get denied I don't know how many times I did it but every time my score went down. So me and my wife are victims of this
Hello I was also a victim and I was denied. After I got denied I started disregarding their letters.
I was also a victim of this credit karma false information. I always got denied
In reply to I was also a victim of this… by Shaquita Sneed
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.
I have applied for credit lines that said I was pre-approved on credit karma and I have applied and was denied to multiple credit
Multiple times credit karma said that I was pre-approved and was denied line of credit which drop my score.
Miriam WhitfieldSeptember 9, 2022
Credit karma led me into believing that I was pre-approved for a vehicle loan through carvana which turned out that I was not carvana did four hard inquiries on my credit which dropped my credit score tremendously I diligently worked hard on to raise my score for a special occasion and hired a credit repair company to make myself ready for homeownership I am new to the credit world and I feel that what credit karma did was predatory and set me way behind in achieving my goal of making my dream of owning my own home a reality I believed in credit karma but as it turns out I was not the only one…
How do we get added to the suit. I applied for their pre-approved credit cards and was denied. They should be held responsible for this since we trusted them to help us improve our credit not damage it.
How do we get added to the suit. I applied for their pre-approved credit cards and was denied. They should be held responsible for this since we trusted them to help us improve our credit not damage it.
I’ve been having issues with credit karma for awhile now I knew something was up with them when I would receive pre approvals then get denied just to watch my credit score go down dramatically so I really hope I get a piece of this lawsuit because this is crazy…
I am also a customer of Credit Ksrma and on several occasions I received notifications that I was pre-approved for a loan only to have them redirect Mr to another lender. I am actually in the middle of one of these loam applications where I was prapproval by Credit Karma but then transferred to another loan web site.
This has happen to me for a credit card and a loan when they said I am approved where in fact I wasn’t approved for either one of these.
In reply to This has happen to me for a… by Terrina Rapoza
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.
This happened to me several times. They “pre approved” me for loans and credit cards and at the end I get denied and still happening just yesterday I tried and they pre approved me again !!!
How do I check to see if I will or am on the list to be compensated
I was told I'd be approved and it resulted in three hard inquiries on my credit report and I was not approved.
This happen to me applied for pre approved credit cards an was turn down
I am a victim of this scam as well. The hard hits really did a number on my credit score, and all for nothing but getting denied. Dumb!
I am always getting preapproved options. I learned a while ago they are false advertising and not true
Yes I was a victim
I also have been denied multiple times by the pre approved credit cards that never get approved for now my credit score went down over 100 points what an I supposed to do now can't get the points back
I was affected byvm cedit karmas pre approval scam on a credit card multiple times
I too have been a victim.. they had sent me several preaproved letters.. the only reason i would apply to them would be because they said i had 90 percent chance of approval but yet i was denied all the time..
In reply to I too have been a victim… by David Jaimes
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.
I was a victim of Credit Karmas irresponsible practices, I have applied for multiple "pre-approved" status loans and cards and have been denied thus wasting my time and destroying my credit under false pretenses.
Yes they got me too
They have done that several times and I not be approved, they mail me offers also
Every time I have seen a email or logged in they say I'm pre-approved and I get denied.
They have actually taken my credit score down tremendously. See almost everytime I signed up for a credit card not only was I denied but my score dropped now I've went from a 700 2months ago to a 556 as we speak. I thought it just me but it's quite a few of us
I'm a victim absolutely