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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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The purpose of this blog and its comments section is to inform readers about Federal Trade Commission activity, and share information to help them avoid, report, and recover from fraud, scams, and bad business practices. Your thoughts, ideas, and concerns are welcome, and we encourage comments. But keep in mind, this is a moderated blog. We review all comments before they are posted, and we won’t post comments that don’t comply with our commenting policy. We expect commenters to treat each other and the blog writers with respect.

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We don't edit comments to remove objectionable content, so please ensure that your comment contains none of the above. The comments posted on this blog become part of the public domain. To protect your privacy and the privacy of other people, please do not include personal information. Opinions in comments that appear in this blog belong to the individuals who expressed them. They do not belong to or represent views of the Federal Trade Commission.

Sasha r
September 19, 2022

I just recently did one and have done others in the past!!

ND
September 19, 2022

Happened to me a few times! How do I file a claim?

Jordyn Foss
September 19, 2022

I was pre approved for lots of cards but now that I know why I always got denied even when I do have a good score I really do expect to be compensated this is outrageous

Lisa Thomas
September 19, 2022

this has happened to Me quite awesome. I have been trying to improve my credit and getting a credit card I thought would help build my credit. It is great to see that some people will get money back for being having wasted time

Valeria Ann harrison
September 19, 2022

I was also a victim of the Credit Karma pre approval scam. What I need to know is what procedure do I need to follow get a part of the settlement?

Michael Destefanis
September 19, 2022

Yeah they got me on this on a credit card as well as personal loans. Was straight up denied on everything in spite of a good credit history.

N. Daniels
September 19, 2022

I too was a victim of Credit Karma giving me pre approvals on my credit report and I was denied countless times. I stopped applying and now I ignore the preapprovals offers. My credit was checked and I now have a bunch of hard inquiries and a decrease in my credit score. I believe I too should be compensated from the results of this lawsuit how to i go about this?

FTC Staff
September 21, 2022

In reply to by N. 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.

Jaime Villanueva
September 19, 2022

I was pre approved for a personal loan for 7,000 from the website then it went to the lender because they said I could use a car that could not be used on the website the amount went down then it went to we have take worse cars than the one I have so I put that as Collateral and only $2,000 loan big jump from 7,000 I’m like what???? Then it went to the underwriting they’ll call me tomorrow right nope within a few minutes there already calling me back say no I don’t make enough and I’m clearly making all my payments and proved I could make that one. But it just ruined my credit more not to mention the card offers I filled out to help build my credit and got denied now I just sit and pay my cay payment and still see my score drop when nothing else happens

Shirley Mcneec…
September 19, 2022

I recently applied for a pre approved card and was denied in which lowered my credit score.

Laurie Torres
September 19, 2022

I too am a victim of Credit Karma, I applied several times and never got approved. It's too bad that they take advantage of people who are trying to better their credit score. How do I get notified to be apart of this lawsuit?

Aaron Duong
September 19, 2022

I’ve received a letter from Karma company with the pre-approved on it send to my home. After follow its instruction to apply on it website. Then it said there were a technical problem, then a week later i got a letter said they sorry!

David Ermatinger
September 19, 2022

I have also been a victim of Credit Karma’s false pre approval methods in which I was denied and it has impacted my credit score in a negative manner.

Katrina Gonzalez
September 19, 2022

Same here but I'm sure most of us won't see a dime because I still haven't gotten a claim form or a letter about any of this.... I several times tried to apply for cards saying I had a very good chance of being approved but got denied after applying... I can't even find a claim form to file out...smh

johnny wilcox
September 19, 2022

I have been denied several times for pre-approved loans to purchase a home starting in 2017. Credit score took hard hits each time so how do I file a claim?

FTC Staff
September 21, 2022

In reply to by johnny wilcox

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.

Rekaila Payne
September 19, 2022

Is there a form that affected clients can fill put to claim their portion?

La'Tayvia Gourdine
September 19, 2022

I was sent several pre approval offers after awhile I just deleted them. I expect to be compensated my credit score went down applying to these bogus offers

Scotty Gonzales
September 19, 2022

Credit karma has been sending me pre approval emails for years- I filled out the boxes of my personal information and credit karma sent it to the credit grantor, some sold my information, some still use it to this day to run my credit- I have over 100 inquires and cannot be approved for a new car loan or mortgage loan because of this. I really only filled it out once and it followed me for years- bad karma 😔

Scotty Gonzales
September 19, 2022

Add me. I have proof if needed

Desiree K
September 19, 2022

Credit Karma has my score now in such a horrific spot. They send me pre approvals constantly and when I go to apply for the credit car or loans and I get denied! It’s not fair! Why sell us a dream!! During these hard times!!

Rosanne
September 19, 2022

I too fell for the pre-approved offers that credit Karma showed me and ended up with 17 hard inquiries on my credit reports which took them from high 600 to low 300 alm9st overnight. I want to be compensated but don't know how to go about doing it.

Michaela Haffner
September 19, 2022

Credit Karma sent me multiple emails around this time and I got “pre-approved” and denied both times I applied which did absolutely affect my credit score. I hope I’m on the list for compensation for this.

Leslie calzada
September 19, 2022

How do i file my claim if i was also a victim of this?

Jessica Martin
September 19, 2022

I was also a victim. I was told by credit karma several times I was pre approved and in the end I was not.

Austin
September 19, 2022

How do i file for this claim as well there were numerous times with cards and loans.

Justin Pereira
September 19, 2022

I received emails and notifications regarding pre-approval while I was at the beginnings of my search into buying a house. My credit score needed a lift so I was considering a new credit card. I closed their links and got denied, which crushed my score and had she ruined my plans of buying a house.

Missy Long
September 19, 2022

This is still happening!!! I just applied to a pre approved loan and was denied, only to ALSO find my score had dropped after applying. I tried a few years ago to apply to the pre approved credit card and got denied! Such a scam

Michael Whitley
September 19, 2022

Credit Karma told me I was approved to refinance my vehicle, but I wasn't approved at all.The same thing happened when I applied for a loan to pay off my credit card.

Tonya Arnette
September 19, 2022

I’m a victim to this pre approval of loans and credit cards from credit karma. I have been denied once I tried to get a credit card or a loan and then get hard inquiries on my credit afterwards.

Robert Hood
September 19, 2022

I have been using Credit Karma for years & have had at least 20 or more applications refused , but was given your pre-approved. MY credit score was not good to begin with, the only cards I could get were the PREDITORY LENDERS,ie Prosper, Aspire, Avant all with Ultra high interest rates. Some even charging interest from day if purchase. A great number of applications were denied,ie,Chase, Citi Bank ,Discover, Walmart, TD bank, each one dinged my credit score to go down some as much as 20 points. Theyvare taking advantage of people who had or have credit problems, only they are making it for worse for me to get or rebuild credit . There others out there who should also be suited by the FTC. I WOULD LIKE TO BE COMPENSATED FOR ALL MY EFFORTS. & THEN TRYING TO GET MYBDCORE BACK UP !!

Lisa Crowningshield
September 19, 2022

This exact process happened to me. I contacted credit Karma about the falsehood and the negative impact the inquiry had on my score. I believe, I just got an apology.

FTC Staff
September 21, 2022

In reply to by Lisa Crowningshield

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.

Phyllis Devlin
September 19, 2022

I am a victim of Credit Karma giving me preapprovals to refinance my auto loan on my credit report and when I applied, I was denied. I stopped applying for the preapproval offers. My credit was checked and caused a significant decrease in my credit score. I expect to be compensated from the results of this lawsuit and I may stop using Credit Karma.

Shari Kilpatrick
September 19, 2022

I have been a victim of this false pre-approval scam. I have been a customer of Credit Karma for many years, and thought it was very unfair to give a person false hope about credit card approvals. I hope to be compensated for my time wasted. God bless.

Lynronda smirh
September 19, 2022

Me and a friend were victims of credit karma pre approval scam. How do we find out if we will be compensated

besnik useni
September 19, 2022

Just recently credit karma said my approval rating for a wells fargo card were outstanding and then of course my credit was hit and I was not approved.

Brandy B
September 19, 2022

Credit Karma sent me a push notification to "check the current rates for auto refinance" after clicking the notification I got notifications from Matercarf that my credit had been pulled. Which I did not consent to. I now have a hard inquiry on my credit for something I was just trying to see rates for .....

Juanita
September 19, 2022

I have received offers and applied just to be denied and my credit score dropped each time.

Leo Mayfield
September 19, 2022

On multiple occasions this has happened to me as well. A few times with trying to obtain credit cards, once with a personal loan to consolidate debt and once with a vehicle loan. I’m glad someone did something about it. Now I’m wondering if the victims of this will actually even see any of that 3 million they were sued for. Probably not me!

Maxi Vela
September 19, 2022

I was a victim several times. I also applied for several pre-approvals just to be denied. Then a few years back someone else applied for some cards in my name BAM! THEY GET MY credit cards and i get the bill and I'm not allowed to dispute any of them for some reason

Corina Smith
September 19, 2022

I was a victim as well for false pre approval

Richard Ricks
September 13, 2022

I never applied for credit through credit karma I just monitor my credit score

Nora
September 13, 2022

How do I make my complaint? Or what's the process?

Persha Riley
September 13, 2022

I’m so glad this haa been challenged … I’m a victim of this mess😞

ErikaK
September 13, 2022

I have also received multiple emails from credit karma with pre approval credit card adds and applied for a couple of them until I figured out it was just a waste of time and I'd just get denied again.

Michael
September 13, 2022

I highly doubt 3 million will be enough to compensate these claims, with the scope of people being duped this is going to amount to something less than the cost of a cup of coffee…..

FTC Staff
September 19, 2022

In reply to by Michael

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.

Aaron M Heger
September 13, 2022

This happened to me several times as well as them claiming my car payments were late thus bringing my score down yet my payment was never late. I've also had a dispute in with them via teansunion and it's been since Dec 14th 2021 making it impossible for me to dispute anything else on my transunion.com/dispute.
Credit Karma is destroying my credit yet not helping to fix what they have hurt

CASSANDRA L RANDALL
September 13, 2022

This happened to my husband and myself too, how do we get compensation for it, cause it affected both our credit scores.

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