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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.

Pablo M Celis
October 04, 2022

I thought i was the only one maybe they made mistake but now i know the truth. Im saddened and hurt especially because my credit was affected due to their dark practices.

Darrien Hopkins
October 04, 2022

How do I get involved just seen on news this just happened to me.

Monique Holton
October 04, 2022

I have applied for plenty of loans and cards from them not knowing at first that it was affecting my credit score and also they don't give you your correct credit score

William Tackett
October 04, 2022

I too would like to see more information on how to make a claim for this settlement.

Tiaunna Nave
October 04, 2022

Was building credit and using Credit KARMA to monitor. Was advertised that i quilfied had an outstanding pre approvial for it loan .. it stayed THIS WILL NOT EFFECT YOUR CREDIT. 😒 after i applied i was denied and my credit score took a big hit.

Jamelah Thomas
October 04, 2022

I know this has happened to me several times. I want to know how to be involved

Kimberly James
October 04, 2022

I also, have been a victim of this and emails about the pre-approval and denial letter. I sent it to them and they denied receiving the information.

TR
October 04, 2022

So where can I get my portion. Did this twice…

Stacy Montano
October 04, 2022

Ive applied more than once and got denied. But on credit karma it said i was pre-approved. For a car and credit cards

Kimberly Smith
October 04, 2022

This has definitely happened to me how do u file a claim

Mike
October 04, 2022

Credit karma also has inaccurate credit scores which are 20-30 points lower than what FICO shows on there web site!

Thomas j porter
October 04, 2022

I was also told i was approved and was denied

Sharon Williams
October 04, 2022

I was a victim to credit karma 's pre approval for credit cards then denied and my credit score went down.Several times

Kimberly Viera
October 04, 2022

Yes I also would like details if anyone knows on how to put a claim in because my credit was hurt by falling for a preapproval when I applied for a credit card

Jon Mcamis
October 04, 2022

I’m a victim of this credit karma preapproved scam how do I find out about information

Shirley Bello
October 04, 2022

I went through this so many times false approvals then credit drops.

Judy C Mosley
October 04, 2022

In August, 2022, Credit Karma assured me that having a third credit card would improve my already good score and told me that I was already approved for numerous cards. I chose American Express and was rejected. Now my credit score has dropped. I wasn't aware that applying for another card would damage my score and it is totally unfair that I wasn't informed of the risk by Credit Karma beforehand.

Judy C Mosley
October 04, 2022

In August, 2022, Credit Karma assured me that having a third credit card would improve my already good score and told me that I was already approved for numerous cards. I chose American Express and was rejected. Now my credit score has dropped. I wasn't aware that applying for another card would damage my score and it is totally unfair that I wasn't informed of the risk by Credit Karma beforehand.

Tricia Leblanc
September 27, 2022

How do we file a claim?

Joyce Harvey
September 27, 2022

I was a victims numerous time and recently was pre approved for which definitely need so I pick my car and to find out I was given misleading information and my deposit amount is way more than I can afford and my payment would be just as much as my insurance and it’s not even the car I had chosen.

Rebecca
September 27, 2022

How do you receive payment?

Tiffany
September 27, 2022

How do we get more information to file with the FTC against this company? I am a victim

Matthew Gesell
September 27, 2022

I used credit karma to get "pre approval" quotes and it dinged my credit, just hope that I get reimbursed.

KF
September 27, 2022

How do I make a claim? This happen to me multiple times and it still happens. I’m sure to me and many others.

kathern Duncan
September 27, 2022

How do I go about being included in this?

Veronica Bowers
September 27, 2022

I also was preapproved for credit card when I apply I was also denied and my credit score was impacted because of my denial.

Wendy Rush
September 27, 2022

How do we apply for the lawsuit? I applied from a Credit Karma pre-approved post and got denied.

Annalisa Glenn
September 27, 2022

Need to know how to make a claim, because it not right to do this to us

Marjorie Jacks…
September 27, 2022

How do you go about joining the Credit Karma lawsuit because I was affected

Darrenj
September 27, 2022

Yea That Happen to me With A Lian Company That They Recommend

Jeremy Smith
September 27, 2022

I have had issues with credit karma and Credit Sesame. They said I was pre approved and then the credit go lower and the slap in the face with disappointment and the No.... then got capital one mailing me a letter making it sound I could get a new car. Just contact this dealer they listed. Well that dealer shot gun my credit making it even lower. Worked and still working to get it back up. Been the world is running off credit. I like to have something done to these people.

Olivia Graham
September 07, 2022

I was a victim I revealed plenty of messages saying that I was preapproved and applied and was denied how do I get in on the lawsuit for false advertising

Joe H
September 27, 2022

i dont believe $3m is enough to compensate for the stress, frustration, disappoinment, and on going targetting of the 10s of MILLIONS of consumers duped by CreditKarmas actions. It may be a typical industry marketing practice but that needs to change as a whole. Glad the FTC is holding CreditKarma responsible and making an example of them but there are other businesses doing the same thing that need to be included in this and the settlement amount needs to be substantially higher - I'm talking BILLIONS. Considering the number of years and consumers it has affected. Myself included. You give these businesses your trust and your private information in the hopes of guidance and help achieving your desired credit improvments only to have the door slammed in your face and they laugh all the way to the bank and their country clubs and private islands etc! ENOUGH IS ENOUGH! I WANT MY FAIR SHARE AND I WANT RESTITUTION FOR MY DIGNITY!

Alyssa
September 27, 2022

This has happened to me atleast twice on Credit Karma. Where ive applied for a card through them because they said i was pre approved and then got denied. Such a bullshit site !!! Ive since deleted it

Elizabeth Mahrle
September 07, 2022

I would also like to know I've been a long time customer of credit karma and always get emails and promotions or pre approvals and very good odds approvals for credit cards all the time. It doesn't seem to show anywhere how we are supposed to add to this claim. Nor did we receive any notifications about this claim.

Miriam Blazier
September 07, 2022

My husband and myself were victims in this as well. Applying for cards and loans we were “pre approved for, just to be denied.

Jessica Lee
September 07, 2022

How do I make a claim? Because this has happened to me numerous times during this time period.

Adrian R Billingsley
September 07, 2022

I was a victim also. Giving me the pre-approved on loans an credit card, only for me to apply an be denied

Latashia Sutton
September 07, 2022

I was a victim of this deceptive act multiple times which caused my credit score to drop tremendously. Credit karma continues to send these emails to this day.

Danita
September 07, 2022

How do I get involved in the lawsuit because this has happened to me as well

Liz
September 07, 2022

I fell victim, I'm not proud of it but I fell three times. I am a slow learner. Is there going to be a way we can provide our information for compensation?

Danita Ford
September 07, 2022

I have received pre approval statements and when I have applied was denied as well and it has affected my credit score the hard inquiries are hard to remove how do I go about being apart of the lawsuit

David
September 07, 2022

How about bait and switch? Their app displayed a non stop barrage of attractive rates for refinancing an auto loan, but when I applied and was told I was approved, it was for a much higher rate. I even have the screenshots for the advertised lower rates.

Megean chavez g
September 07, 2022

Both my husband and I have been tricked by good chance approval with this company. How do we file

Wayne Politick
September 07, 2022

I was a victim of that for credit and auto refinancing as well.

Susie Brown
September 07, 2022

Would love to be compensated for this when/where do I sign up.

Darrick Mclean
September 07, 2022

They definitely got me with that

Anthony Farrell
September 07, 2022

I was also a victim of this, probably more then once. How do I file a claim?

Danyelle Ross
September 07, 2022

Will the ones that were affected be compensated as well? Or just the major company that sued them? In all fairness we the victims should get rewarded. And yes I am one of those victims of the promised pre-approval that never happens. I received and applied to that credit karma offer more than once.

Kim Ramos
September 07, 2022

Credit Karma has done this to me multiple times. Said I was pre-approved for refinancing my car loan only to be denied. How to I submit a claim for this lawsuit?

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