Business Blog
$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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In reply to I was a victim of Credit… by Vivian Butler
I went thru the same as you numerous times...SMH
In reply to I was a victim of Credit… by Vivian Butler
I was a victim of credit karma my credit was checked to cause a decrease in my credit score
In reply to I was a victim of Credit… by Vivian Butler
It has happened to me on numerous occasions and now once again saying I will be approved or they will pay me $50 dollars what kind of scam is that I wasn't approved and I didn't get $50 dollars
Knew something was not right. Received many texts stating I had a very high chance of being approved for a credit card. I would never apply for a credit card on a site such as Credit Karma’s site. I know it’s a “marketing ploy”.
In reply to Knew something was not right… by EC
They did me the same way I was trying to build my credit then they Would say to apply for credit card but then if I'm denied my credit points go down now how do I sign up to try to get paid back in this lawsuit
In reply to Knew something was not right… by EC
They did me the same way I was trying to build my credit then they Would say to apply for credit card but then if I'm denied my credit points go down now how do I sign up to try to get paid back in this lawsuit
In reply to Knew something was not right… by EC
I was pre approved with great approval odds and once applied for the credit card was denied and hit w a hard inquiry and my credit score also dropped. The credit card approval odds are so inaccurate and not acceptable to customers,working on there credit.
In reply to Knew something was not right… by EC
I have also been a victim of Credit Karma. They were several times that I was told I had excellent approval odds and was then denied.
on the ftc suit against credit karma if you applied for a card or a loan because credit karma said you preappoved how do get in on the law suit to be paid.
In reply to on the ftc suit against… by william sullivan
I would like to get on the list to find out how you file a claim on the Credit Karma lawsuit. I have gotten several pre-approved fir credit card and car loans just to be denied and caused my credit score to be lowered every time. Please let me know. My email is Klbblk1957@gmail.com
In reply to on the ftc suit against… by william sullivan
I applied for a credit card and got denied
In reply to I applied for a credit card… by Jacob Delatorre
Yes the same has happened to on several occasions
In reply to on the ftc suit against… by william sullivan
Yes I would like to know how to get paid on the FTC lawsuit. Will everyone denied be compensated automatically or do we have to apply?
In reply to Yes I would like to know how… by Beverly Helm
I was wondering the same thing. I get a pre-approved email at keast 3 times a week.
In reply to Yes I would like to know how… by Beverly Helm
I would like to know if I can be compensated for the credit karma lawsuit?
In reply to Yes I would like to know how… by Beverly Helm
That’s what I am wondering. Im wondering if they, the FTC, will advertise or what.
In reply to Yes I would like to know how… by Beverly Helm
Credit Scores are both incorrect.
In reply to on the ftc suit against… by william sullivan
Few times they said I was approved and hurt my credit score would like to be compensated
In reply to on the ftc suit against… by william sullivan
That's what I want to know!! I distinctly remember applying for a card just because it said I was pre-approved!! I was denied but the card companies ran my credit every single month for a whole year!! I'm going to look into a lawyer myself now that I see this law suit!!
In reply to on the ftc suit against… by william sullivan
Credit karma said I was peaproved for credit cards and personal loans which resulted in my credit score being negatively impacted. Teey offered no help fixing this on my credit report. I thought they were suppose to help. Looking back I believed them.
In reply to on the ftc suit against… by william sullivan
The same thing happened to me! I had a good credit score and needed some extra money for a new central air conditioning unit installed in my house, I also received several credit card options on my Credit Karma site I received several emails as well stating I was pre approved for for 2 or more credit cards and to go ahead with applying for one. I was DENIED FOR THE FIRST CARD BUT,THERE WAS ANOTHER CARD THAT CREDIT KARMA VIRTUALLY PROMISED ME I WOULD BE APPROVED AS WELL AS AN APOLOGY FOR BEING DENIED. I WAS DENIED TWICE AND THOSE TWO APPLICATIONS DROPPED MY CREDIT SCORE 39 POINTS!! I HAVE ALSO FILED DISPUTES AGAINST CREDIT KARMA AND EQUIFAX FOR LISTING MY CREDIT HISTORY WITH FALSE BALANCES ON MY PERSONAL ACCOUNTS. I AM A VICTIM OF PERSONAL INFORMATION BEING CONFISCATED 2 YEARS AGO IT WAS A NIGHTMARE! I AM A WIDOW RECEIVING SSI ONLY AND LIST MY BARBER BUSINESS COMPLETELY DUE TO COVID 19 PANDEMIC TO BE ADDED A VICTIMS OF HURRICANE SALLY SEPTEMBER 16TH 2020. I AM OUTRAGED DUE TO THE DENIAL OF CREDIT CARDS THAT IS TOTALLY CAUSED BY CREDIT KARMA, I have worked hard and honestly to have a good credit score and see how easily and instantly it is ruined by CREDIT KARMA! PLEASE HELP ME WITH THIS ISSUE.
SINCERELY,
JAN E KUBITZ
In reply to on the ftc suit against… by william sullivan
All of the above complaints
as stated happen to me
When will we get settlement on our claims
In reply to on the ftc suit against… by william sullivan
Credit karma offered pre approvals on loans and credit cards even refinance my car and give me a lower APR on several accessions I did apply for them knowing I would be approved because I thought credit karma was actually standing on their word.
I love it. Its about time that they pay for false promises, when people are looking to get loans or credit card transfers from the damage to their finances a fares after COVID19.
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 have proof.
In reply to How do I make a claim?… by Joseph
This happened to me 4 times
In reply to How do I make a claim?… by Joseph
I keep going onto Credit Karma to get a personal loan and continuously asking for a loan amount and press to get the loan but end up closing out the site. I tell them amount and a larger amount pops up, and then I continuously all week even today help?
In reply to I keep going onto Credit… by Gwendolyn Coker
I was looking to pay for my denture procedures and logged into credit karma and I was told I was pre-approved for $3200 ams I applied only for me to disappointed and then again I figured the credit scores are not accurate..showing 600+ score only for u to pull ur score and its 500
In reply to I keep going onto Credit… by Gwendolyn Coker
I was also mislead. I was pre-approved for many things I got denied for causing my credit score to decrease. Credit Karma was misleading out of the gate. When I signed up for an account under the assumption I'd recieve my tax refund sooner. That never happened and I was in the running to win $20,000 by opening account but if you read the fine print you didn't need to open the account their were other ways to enter. Karma's a beast CK and here she comes for you.
Rebecca Giles
In reply to How do I make a claim?… by Joseph
I keep going onto Credit Karma to get a personal loan and continuously asking for a loan amount and press to get the loan but end up closing out the site. I tell them amount and a larger amount pops up, and then I continuously all week even today help?
In reply to How do I make a claim?… by Joseph
I feel for this too and have countless hard inquires because of it trying to rebuild my credit and got 6 hard inquiries because of this.
In reply to I feel for this too and have… by Jeanie
Credit karma has also deceive me of giving them my personal information and tricking me to apply for a credit card that I was supposedly pre-approve of and it has happened multiple times until I just stop applying and deleting every email I receive from them
In reply to How do I make a claim?… by Joseph
Please let you know because I’ve been tryna find out how to signup. I have definitely been duped by credit karma with dozen of pre approval and credit hits.
In reply to Please let you know because… by Kia
How do I apply for this class action lawsuit? I've been getting these pre-approval emails and applications from credit card companies.
In reply to How do I make a claim?… by Joseph
I'm looking for that information as well. If you or anyone else reading this has a link or contact information of who/how to file a claim and or complaint, about CK's false statements of pre-approval, please share with not only this site but publicly.
I think if more people come forward with how we were all affected by these false pre-approvals the settlement/plus fine should be much higher than 3 million.
In reply to How do I make a claim?… by Joseph
Since FTC was the agency that sued credit karma they automatically do it on behalf of all consumers. But $3 million doesn't sound like a whole lot of money.
I believe FTC will be reaching out to everyone that has been applied from the pre-approved section and was denied between those specific dates.
In reply to Since FTC was the agency… by David Y
Yeah I wouldn't count on seeing anything more than a few cents if anything at all from this lawsuit.
In reply to How do I make a claim?… by Joseph
I’m waiting to be compensated!
In reply to How do I make a claim?… by Joseph
This has happened to me numerous times how do I make a claim
In reply to How do I make a claim?… by Joseph
Following, how do we make a claim?
In reply to Following, how do we make a… by David Bradley
credit karma just guaranteed me a credit card or they would pay me fifty dollars if I was not approved. It was with Credit One Bank or Financial. It also did this with multiple personal or debt consolidation loans like One Main Finance Company, Amex, Citi, even Fingerhut/web bank, Capital One. Which they would have high interest rates, and place hard hold on my credit report and false advertisement. I just closed down my account with them after they tried to offer me a prepaid Credit Karma Debit card. I am disabled and a victim of identity theft on things scammers knew from accessing Credit Karma.
In reply to How do I make a claim?… by Joseph
This has happened to me many times and yes every time the do a inquiry you lose points when denied or approved
In reply to This has happened to me many… by Allen Pringle
I applied for a pre approved personal loan and got declined then I got approved from one of their other partners. The partner gave me preapprovals from their parter Fiona and the same thing happened I got declined because they said it had not been enough time since I started my first loan… well then why tell me I’m preapproved? This all happened to me in 2022 so I guess I won’t be seeing any money since the lawsuit is from 2018-2021.
In reply to This has happened to me many… by Allen Pringle
This keeps happening to me. Received a denial letter I’m the mail the other day.
In reply to How do I make a claim?… by Joseph
I too was harmed by this practice and complained to credit karma about being offered than declined. Can I be part of the reimbursement?
How do we as customers get involved in this company because I am one that fell for this on credit karma
In reply to How do we as customers get… by Mark Luedeman
False hopes of trying to better ourselves with help from people / companies like these..
Sad
In reply to How do we as customers get… by Mark Luedeman
Me and my fiance are wondering the same thing. Sign me up.
In reply to How do we as customers get… by Mark Luedeman
I am a credit karma customer who kept falling for the pre-approvals and has seen nothing but decrease in my credit score.
In reply to How do we as customers get… by Mark Luedeman
Where do I sign for the lawsuit