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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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Raphael Rodriguez
September 21, 2022

It happen to me as well one was the credit card pre- approval the other a promise of approved for a loan and got denied after it said I was pre-approved

FTC Staff
September 22, 2022

In reply to by Raphael Rodriguez

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.

Bethzaida Fontanez
September 21, 2022

I am a consumer of credit karma & have applied for credit cards being told I was pre approved & was denied several times during this time period

Kimberly Davs
September 21, 2022

I was a victim of Credit Karma saying I was pre approved more than once. I applied for a credit card twice and a loan. I only applied because credit karma said that I was pre approved every time.

Magdalene frede
September 21, 2022

This has happened to me numerous times how do u put in a claim or do you already have our names

Magdalene Frede
September 21, 2022

This also affected me what do qe need to do

M. COLEMAN
September 21, 2022

Where can we apply for redress to what's been done to us by this company?

Samuel Jones
September 21, 2022

I am a victim

Janet Lankford
September 21, 2022

Credit karma has told me I was approved for several credit cards. Then when I filled out applications I was denied credit. They give you false information.

carlos Luna
September 21, 2022

I applied to multiple credit card offers and was denied every time. Credit Karma posted that I had excellent approval odds and had hard inquiries which later haunted me when I needed a car loan.

Samantha Garcia
September 22, 2022

I experienced this same complaint. I was sent pre approval or outstanding odds of credit card and loan offers from credit karma only to be denied. Also resulting in damaging inquiries on my credit report equalling a lower score.

Debbie oxley
September 22, 2022

How do I make a claim? Because this has happened to me numerous times. They send me approvals for auto refinance, personal loans, credit cards but when I applied I was denied

Freiya Frails
September 22, 2022

This happened to me multiple times and messed up my credit

Daniel Rush
September 22, 2022

3 times they got me

Lavinia Prince
September 22, 2022

I believed them when they said I was preapproved

Jenise Floyd
September 22, 2022

I was definitely affected by the false advertisement via Credit Karma. I applied for Credit cards, etc and was denied. You can definitely check out my account with credit karma as well as my credit and clearly see that I was affected.

FTC Staff
September 27, 2022

In reply to by Jenise Floyd

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.

Lakishia smith
September 22, 2022

I was working on my credit they kept saying I was pre approved for a car loan and credit cards and when I applied for them my credit score dropped by 30 points

ELLEN MATHIAS
September 22, 2022

Many many times I have gotten emails about "Pre-Approved" but when you apply, you are denied leaving a HARD INQUIRY remark on your report causing your credit to drop. This continues to this day too with Credit Karma. I stopped looking at the emails!

Jenifer Mule
September 22, 2022

I have gotten these many times, occasionally I try for the card, but I always get turned down.

Judy Fowler
September 22, 2022

I had that to happen to me before

sheila anderson
September 26, 2022

I experienced lots of hits to my credit score due to these practices, it is a shame.

Neoli H
September 26, 2022

Tried to get a secured card with them & it was rejected. Did it with my local federal bank, easy set up. I also used Credit Karmas Seedfi service & they didn't provide the service they promised & it was supposed to help boost my score. More time wasted & they stressed me out with my credit score being impacted for services I didn't even receive bc I wanted to close it down

Leatrice smith
September 26, 2022

I have been a victim of this. Being told that my credit was good enough for certain cards and then being denied while my score drops. That’s devastating

Jerri McClain
September 26, 2022

Credit Karma told me I was pre approved for a credit card and I wasn’t. My score dropped tremendously. I’m very upset about this.

Tina M Rivas
September 26, 2022

I'm victim also with all the fake approvals and loans

TANYA HENDRICKS
September 26, 2022

Credit karma put me through pre- approval for over a year. The first time I applied I had pre- approval with excellent odds they pretty much told me it was guaranteed. They approved me $15,000 and $1000 down BUT one big problem they didn't have any available cars for that price and to keep checking back and they kept showing me offers of brand new 2020 for $50,000 (first time I applied was 2020) Your pre- approved
Figure is locked in for 3 to 4 months and then you have to apply again. The second time I applied my credit score dropped 50 points because of the last time but it said again excellent pre-approval now I was praying they had a car this time. NOPE, that didn't happen I only got approved for $6000 and they wanted $4000 down! At that time I didn't understand what was happening until now. So, I try again because I got approved for $1000 down on $15,000 they got to give it to me again I haven't changed a thing. The third time I apply again credit score went down again I couldn't figure out why it was going down I was getting bad credit pre- approvals now that I look back. I'm pre- approved excellent. I got denied and told to apply again in 3 or 4 months. Finally I get a loan from Exeter I live in a rural area I drive 2 1/2 hours to get it, it's not ready and I broke down on the way home lights started blinking like crazy and then it died. I was in the middle of the highway it was late at night. That was on 3/2/22 Ii contacted them the next day and told them what happen and they were not sure why it happened and keep on eye on it and see if it happens again and I may have to drive it back 2 and 1/2 hours to get it fixed or towed. I don't receive my bill in the mail I know I have payment sometime in April I have missed placed the folder plus because my son-in-law is loosing his young life to cancer and they have a one year old. I need a working vehicle. I find the folder my payment due 4/16/22 and I call them I tell them I didn't get my bill cause it's past the 16th they said no problem lets make sure address is right and she will get it out to me and to contact her back if I don't receive in the next two week. I notice in the huge stack of papers when I found them and for a 2013 Ford F150 I'm paying
$41, 889.84 @25% interest because in the pages I was signing away 50 pages on all those pages it said $20,000 retail buyer until close to the end and it says retail installment for a 2013 $41,889.84. I couldn't do anything at that point because I need take my son- law to doctor. I did not realize I'm paying over double for a 10 year old car it still ends up being a bad deal. I could have taken $2000 and just bought one for that but NO credit karma made it seem like I was guarernteed pre-approved having the best odds with them and instead it turned into a nightmare. I finally get the bill from them it took the whole two weeks. I owe April and I'm coming up on May. I'm talking to dealership on how to get it looked at because the transmission wouldn't shift now 2 more times. I also have no tags because they have them and temp title. So they will check for dealership close to me and maybe get it towed there. I had the truck 60 days no repo notice no one said anything to me about they were taking it and my son in law wakes me up at 3:00 AM screaming someone stealing the truck. I go running outside half dressed fighting with guy who came up into yard to hook up . He is screaming at me telling me I should of paid my bill I call the police because it's 3 AM normal people don't sneak around someones house at 3 AM. I tell officer I have the paperwork in the house I have no plates yet it broke I just put Down $2000 and had it for 60 days. He told me no he don't need see it that a repoman can just take it. I said you show me some paperwork because my loan company never said anything or mailed me something saying they was going to repo. They were working with me. No the officer let him take it not showing any ID or paperwork didn't even tell me where he was from or where he was taking. I'm sorry I'm devastated at this point and then my son in law looses his battle and life to cancer. I get my statement in June for my payment not saying a word about them repossessing the car. I have no idea where it's at they have no idea it was repoed I just got it. I could not deal with this at that point. They don't even know they repo it. Nothing but a nightmare planning funeral with no vehicle and no one knows anything about but some guy at 3 AM sneaking around who doesn't give business card just drives away it. On 7/13/22 I get letter from Exeter we repo your car..yea two months ago..glad they found it. They want to reinstate the agreement WHAT. They had just called me two days ago and didn't even know it was repoed. Now the want me to take bake a broken down truck that's 10 years old and paying $42,000 and they just realized I got repoed 2 months and again I get letters weeks after the dates on the papers. My husband passed away 9/8/22 so now my daughter looses her husband and her father and our family is really devasted and have no vehicle and this company sucks!! Send me my bills like I still have the car and then sends me notice 2 months after repoed they may repo it. On Sept 11, I get call the dealership says your plates are ready title. WHAT?? I said does anybody know they repoed it. I have to tell someone from the company at least once a week "you took it 3 months ago" and I got a letter this week it was sold back in August and I owe $15,000. Didn't even tell me date of sale nothing cause nobody at Exeter even knew it was repoed and was sold. I'm sorry this is so long I'm mourning this has been a nightmare. Own a truck cost me $2000 maybe drove it 15 times and now it cost me $15,000 Credit karma has caused me a nightmares my identity was stolen in 2020 they haven't helped me at all. I'm sorry when I saw this it made sense and this is the first I even talked about this stupid truck. I think I'm just gonna stay off that site because I looked the other day when I got the papers saying they sold the truck but they just called to have me reinstated now they call me 3 times day I don't even answer I'm tired of telling every person who works at that company you already took it and sold it and it already on. Credit karma
See if I get pre-approved best deals. I'm sorry again anyone who reads this whole thing bless you.

FTC Staff
October 17, 2022

In reply to by TANYA HENDRICKS

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.

Deja Gregory
September 26, 2022

Same here, I applied for a credit card thru credit karma that said pre-approved and was denied multiple times and took a bad hit on my credit report that I've been trying very hard to raise my credit score and in less than 30 seconds my score dropped and several months of hard work gone for nothing

Dee
September 26, 2022

I was duped into believing that I was approved for personal, car loans and credit card. It was “outstanding approval”. When I applied, I was denied. I was rebuilding my score and after that my score dropped dramatically!! How and where can I file a joint complaint?

RONDA ROSS
September 26, 2022

I too was "pre approved" or"guaranteed approval on many of credit karma's offers, but everyone was denied. All these offers did was drop my score.

FTC Staff
October 05, 2022

In reply to by RONDA ROSS

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 Carmona
September 26, 2022

I am also a victim of this game I apply for several credit cards that I never got approved for but said I was pre-approved

Larry Harms
September 26, 2022

How do I get my compensation settlement as I was told told I was pre-approved for a car loan and was denied when I applied. My credit score was 824 and dropped by 10 points.

Kathy Jackson
September 26, 2022

The same thing has happened to me and still is. Credit Karma offering loans and credit cards with high approval rates and my credit score dropping for not being approved and credit score drop because of an inquiry.

Shaneda southern
September 26, 2022

I was a victim of credit karma how do I receive what owe to me

Susan Hill
September 26, 2022

I used Credit Karma.

Cynthia Whitfield
September 26, 2022

I’ve been affected

Jo Daniels
September 26, 2022

Yes, I was also a victim of Credit Karma how do i file for compensation??

FTC Staff
September 27, 2022

In reply to by Jo Daniels

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.

Cheryl Chinn
September 26, 2022

I was a victim of the pre-approval that credit Karma said for a credit card.I went and applied for several credit cards that Credit Karma sent me through email and was denied for every one of them.

Ciara Camara Raygoza
September 26, 2022

This happened to me as well, where can I file against credit karma?

Stacy Cleveland
September 26, 2022

Not only have I gotten denied multiple times for "pre-approved" offers for loans and credit cards, I am tired of only being shown predatory lenders for loans wanting a 30% or higher interest rate. Credit Karma scores don't match any other score put there and seems to be nothing but a scam site nowadays.

Sandra Walker
September 26, 2022

Where can I apply Credit Karma has cause me to get back in credit card debt after having good credit and purchasing a new house. I need to be compensated.

Chari h Fabian
September 26, 2022

I was so called approved are they would pay me 50 dollars .I was denied and of course no payment.Sucks trying to rebuild my credit and it lowered my score

FTC Staff
September 27, 2022

In reply to by Chari h Fabian

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.

Shayla Alcantara
September 26, 2022

I too have clicked on the emails for pre approval of credit cards, lower refinancing on my car, as well as lower insurance. All to which I have been denied which has also impacted my credit score. I would like to inquire on how I too can file my complaint.

sandra riles aubrey
September 26, 2022

I was told the same, that I was pre-approved of a loan and credit card, but got denied too. I did it several different times and still the same not approved.

Atasha Williams
September 26, 2022

I was a victim of this also. I applied for cards that they said I was approved for and was denied.

Tammy Parrish
September 27, 2022

I was also a victim.I am a single mother who was trying to keep from losing my home at the time and I had a tad of hope when I filled with them just to be let down but their not the only one I was done that way with others can I file with them also and how do I file with credit karma .