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.”
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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I had received many credit card offers to help my credit, as well as loan options of 2,000 or higher. I was curious as to all the acceptance notifications, I was receiving with most I was unaware of due to credit karma taking it apon themselves to pre apply for me. Then they would email me that I was approved. Being a mom of three young children I thought well try it. I spent a lot of time, energy and aggravation trying to improve my life threw credit karma. The constant denial after having credit karmas green messages of excellent chance, or pre approval was heart wrenching. Again with having three small kids and a ever lowering credit score, it was hard to see a positive with credit karma.
How do I apply for this claim ? They have dropped my score many times for applying for cards that they said I was approved for
I was told I had a high/Good approval rates for a personal loan, nd when I called the company, I was Denied in 2022 do I qualify for the law suit involved,
I also was a victim of this and it causes my credit score to drop numerous times due to them saying I was approved and then getting denied
I was miss lead by all the Approval information. I was told I was approved for a loan and I really wasn’t
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 was sent several “per approved” credit cards, also personal loans and refinancing for my car. Every time I would apply I would be denied and also my credit score went down. I applied several times with several personal loans, car Refinance, and several credit cards each time being denied! I want compensation back for the hard inquires now on my credit due to this. Also, the time spent and the amount of my personal information that I gave out for this and was denied!
I have been through thos same deal through them only to get denied and having another report on my credit so how do I get money from this and get it off my record?
I was one of those victims. They said I was approved for sertan things so I applied and got denied and hurt my credit and they keep sending me preprove for refinancing my car .. I didn't do it but this isn't right for the pet that's trying to work on there credit..
Apparently, I too have become a victim to the shpil Credit Karma pulled. I bet I have tried multiple times over that period to try and get credit card to help my credit.
I had no idea they CK were actually tricking me into hurting my own credit. Smh. No wonder I never got approved .
I was a victim. I received many messages stating i had high approval rates for a few credit cards. I would apply and be turned down. I am in the process of building my credit. The hard inquiries actually lowered my credit score. I should definitely be compensated for the time i wasted and my credit score being lowered. So wrong for credit karma to do this to its loyal customers!!!!
July 8 2022 I was pre approved for 7.99% on a loan, went the the process just to out it was 16%. It was a complete waste of time
This has happened to me for several years. I would get a pre approval and thought at times my credit was improving based off if credit karma reports. However, I was declined several times and my credit was reduced from the hard inquiries.
They just sent me an "outstanding chance" of pre approval for a card. I applied since every other card I applied for approved me. Well I checked and from not only opening the new accounts, but the way they look at your credit my credit tanked from 700 to under 500. I pay my cards off each week and use them throughout the week to shop for Christmas. When these credit companies pull the reports they don't see my balances are paid off in full they just see a large balance now. So I thought it was weird I got this outstanding approval rating when my credit tanked so bad. Now I have a hard inquiry and was denied. I would have never filed if I knew these weren't accurate. When I checked 2 days later that "outstanding" rating went to "fair". Of course I just heard about this on the news today. Guess those of us still being told we are going to get a card and don't and our credit takes a dump miss out and are just told too bad.
I was a victim of credit karma telling me this as well and filling out for it I wasn't approved and my credit score went down now I'm trying to build it back up
I was a victim of credit karma telling me this as well and filling out for it I wasn't approved and my credit score went down now I'm trying to build it back up
This happened to me I wrote them a letter asking them how they could do this. Of course, they never responded.
Always made me mad because it would say outstanding odds or pre approved and then get denied and it hurt my credit. I wouldn't have done it had they not said approved already
I have been a victim several times from this by Credit Karma!!
This has happened to me so many times and then it effects my credit so bad. How can we go about getting information if we were impacted by this.
My wife and I been with Credit Karma for years, we also had been approved from countless of pre-approvals for credit cards, loans, even for applying for a home loan, we was told we were pre-approved but yet and still hard inquiries ran with no productive results.
This happened to me
They did the same thing to me pre approval on credit cards I couldn't get them my score dropped how do I join this lawsuit I was also promised loans that I could get and couldn't because they weren't approved wow what a scam
I was also a victim of this while trying to build my credit to buy a house!!
Hello we all would like to know how to get paid. I was affected from 2018-current, with credit card offers and not approved. Score dropped and hard inquiries on report now.
I was also mislead by credit karma for a personal loan and credit card!
I an account with credit karma 2013-2019, i closed my account because each time credit karma approve me for credit cards but I was actually denied. Credit karma we’re also sharing me information with third parties, that I was unaware of.
How do you get involved in the class action suit?
Wow, I am so glad that the FTC is bringing awareness to this issue. There is no reason they should have been exploiting us and our information. I remember how upset I was applying for a “pre-approved” offer and getting denied shortly after. It is not fair, and is also very misleading. My only question now is how will those affected, including myself, be able to apply for what they are entitled to?
I was definitely a victim of this do we have any information how to be sure our name is included in the filing? This isn't a class action lawsuit so it does not seem as straightforward how to sign up other than trust the FTC and credit karma will identify victims fairly which is highly doubtful.
How do we file against them for this? I had a massive and I mean massive credit score drop because of them.
I was a victim to credit karmas false advertising of pre approval 3 times which resulted in harm to my credit score!
it shouldn’t be this way.
I was subjected to this practice several times. I applied repeatedly for loan offers and subsequently was denied every single time. I received multiple adverse letters, which brought about unwanted solicited loan offers, which were denied also. Information was passed to just about anyone.
How do I file a claim for this? It just recently happened to me, again, and my score dropped by 60+ points. I also want to know if the inquiries will be removed, if so, when?
How will it be determined what the remedy will be?
Me and my husband use credit karma and we got the ore approval of credit cards then got denied I wonder how consumers are gonna get that settlement money
I have been a victim several times with applying for a credit card
I was deceived by that website, they gave me false hope of being approved, then i got depressed because i was denied. On top of all that they kept pulling my credit which made my credit score decrease significantly.
September 6, 2022, I, Curtis Addison was and still are a victim of credit karma saying I'm pre-approved of a loan that I'm in desperate need of
I was caught up in this pre approval scam. Totally ridiculous and they are still sending me pre-approvals.
I over many years, have been a victim of the lies from credit karma, telling me I am pre approved for credit card and loans. Once I would try and obtain a card or loan, I would be denied and then start receiving text messages and emails about applying for more loans that I am approved for. When I apple, I am always denied.
I have been using credit karma for years, probably since they first came out, and many times I have apply through them and never got approved of any credit card. The only reason I use them now is to check my credit score
I too was targeted due to being pre-approved (consolidation of credit balance)and it clearly stated "good chance of approval". I applied twice and was denied and my credit decreased even further.
I also use credit karma and was victimized
I received several pre approval messages stating that I was pre approved for a credit card and each time that I applied, I was denied.
How do you get added to this as being a victim. Seems like they did this to everyone who uses it.
I am 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
I was a victim of this by being told approved and then denied! How do I file a claim?
Yeah Credit Karma made my credit score drop quite a bit by saying I was pre-approved and then finding out I wasn’t only after I applied. How is the money going to be appointed to the consumers affected?
I too was a victim for an auto loan to refinance and it said my odds for approval and was denied ! Credit was hit by 25 points ouch !! I need my compensation asap
I have also been a victim of this from credit karma.