Skip to main content

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.”

Image
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.

It is your choice whether to submit a comment. If you do, you must create a user name, or we will not post your comment. The Federal Trade Commission Act authorizes this information collection for purposes of managing online comments. Comments and user names are part of the Federal Trade Commission’s (FTC) public records system, and user names also are part of the FTC’s computer user records system. We may routinely use these records as described in the FTC’s Privacy Act system notices. For more information on how the FTC handles information that we collect, please read our privacy policy.

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.

  • We won’t post off-topic comments, repeated identical comments, or comments that include sales pitches or promotions.
  • We won’t post comments that include vulgar messages, personal attacks by name, or offensive terms that target specific people or groups.
  • We won’t post threats, defamatory statements, or suggestions or encouragement of illegal activity.
  • We won’t post comments that include personal information, like Social Security numbers, account numbers, home addresses, and email addresses. To file a detailed report about a scam, go to ReportFraud.ftc.gov.

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.

Rebecca Hunt
October 06, 2022

In reply to by Babette McCraine

I have and continue to receive pre-approved offers for loans and credit cards and I have been declined each time. This company states the offers are based on info in my credit report but I am always denied and my credit scores have dropped significantly.

Mary Beth Marlar
September 06, 2022

In reply to by Mark Luedeman

I went through this several times with credit karma. I expect to be compensated.

Mr.Carr
September 06, 2022

In reply to by Mark Luedeman

I have been victim of this matter as well. And it really pushed me back especially when you trying to rebuild your credit.

Donna Sorrenti
September 06, 2022

In reply to by Mark Luedeman

I get these all the time. I tried a few and got denied. Now I just ignore them.

Donna Renee Sorrenti
October 06, 2022

In reply to by Mark Luedeman

How can I get in on this. I have been denied 4 times
Now I just ignore them

Jessica Jean
September 06, 2022

In reply to by Mark Luedeman

How do we go about these lawsuit ive been using credit karma for years and also experienced not getting approved for credit cards after being told I qualified

William P Henrick
September 06, 2022

What you read is all true. These practices cost me hits on my credit score.

Camille Simmons
September 06, 2022

I have an account with credit karma and the same thing happened to me. I was told that I was approved for 3 credit cards and went through the process end was denied so I lost a bunch of points because of that. SO I stopped applying because I didn't believe what they were saying anymore So I believe there should be a compensation for and for credit points being taken away from from being told pre approved and wasn't

Tina Blackwell
September 06, 2022

I was victim too for both car and credit card drop my credit

Stephanie A Molek
September 06, 2022

I was also told I was pre-approved for multiple loans and then would get dinged on my credit and not get approved. I expect to get some of this settlement money. Very unhappy

Mario Ramirez
September 06, 2022

I too was denied in between that time and it should be recorded by the bereau of when i got denied. How do i file a claim?

Marcus Thomas
September 06, 2022

I was a victim to this also how do I file explain against Credit Karma

Christopher Pike
September 06, 2022

I have attempted multiple times for a pre-approved loan through credit karma only to be denied every time. It was hurtful to my score, a waste of time and resources, a pain to research further, and just to be given the run around has been extremely stressful to me.

Lila Pellot
September 06, 2022

Same thing happened to me Credit Karma claimed I was “pre-approved” for a credit card and it hurt my credit score as a hard inquiry. I will stop using credit karma after this settles. I should be compensated as well.

Julia Bean
September 06, 2022

I have quite a few hard inquiries on credit cards they said I had high approval rating and got denied for all. How do I make a claim about this?

Retta Price
October 04, 2022

In reply to by Julia Bean

I have used CK for years and applied many times to pre-approval credit cards, always denied. The last time I applied was Sept. 3, 2022. How do I become included in your lawsuit?

Andre Stephens
October 04, 2022

In reply to by Julia Bean

I was a victim of Credit Karma giving me preapprovals to refinance an auto loan on my credit report and when I applied, I was denied more than twice. I stopped applying and now I disregard the preapprovals offers. My credit was checked and caused a decrease in my credit score. I expect to be compensated from the results of this lawsuit and I may stop using Credit Karma altogether until they are held responsible for their dark advertisements!

Nanlisha Stewart
October 04, 2022

In reply to by Julia Bean

I have been applying for credit with various creditors with Credit Karma for OVER a year. The site always say excellent approval odds with upstart and prosper but I have yet to be approved with either company! I’ve notified CK several times but nothings changed!!!

Aniya sanders
October 04, 2022

In reply to by Julia Bean

Are they going to release and site to submit a claim? I’ve definitely applied for a few loans and credit card based in false recommendations form credit Karama

Nicole Mathis
September 06, 2022

Its about time. All these so called credit help apps need some discipline. Plenty times approval odds are shown as high but approval was absent. I've stopped believing in any offers provided by karma, sesame, wallethub, you name it. Fix the whole system.

Amber D
September 06, 2022

I had approvals for a short while on the site but now all pre-approved cards & loans are denied & lower my score.

Cynthia
September 06, 2022

I have used the information that was provided by CK to apply for loans and look at the various credit cards offers that were available to me. Earlier in the year I did apply and was turned down.

April T
September 06, 2022

If you were negatively effected by Credit Karma and meet the qualifications stated, how can you be included the settlement?

Amber
September 06, 2022

I have also been mislead by the pre-approval ads. I foolishly applied for more than 5 cards I was "pre-approved" for and the results suffered my credit score as I was denied.
Now since some light has been shed on this. I can honestly say, reading credit karmas enticing pre approved offers built me up to believe that I would be approved. I have been working on building my credit for 3 years and those pre approved offers will hinder me for a atleast another year and a half. If this turns up to be a shady act against CK I believe I am owed some compensation.

Kara Quintero
September 06, 2022

I am a victim of this as well, how do we receive compensation?

Whitney Trexler
September 06, 2022

How do I make a claim? This happened several times

TL
September 06, 2022

I was a victim of credit karma for approved credit cards and when I applied was denied and my credit score widows drastically. When I contacted them, the lady was so rude,

Stephanie walsh
September 06, 2022

How do consumers get involved in the settlement?

Luther
September 06, 2022

I’m still getting thee pre-approval of both cards and car refinancing; telling me I’d get a lower car payment; then theirs the pre-approval on credit cards; now I have 15 inquiries on my credit report and I don’t even want get into the personal loan pre-approvals.
I finally realized not to trust those pre approvals.

Shanna Clutts
September 06, 2022

I have noticed that there has been a difference in my credit score. Credit Karma will show what it has and my bank will have a different number. Has anyone had this happen?

Jabulani Seay
September 06, 2022

I was a victim of Credit Karma's false advertising numerous times..!!!..I fell for it everytime

Antionette Plowden
September 06, 2022

I have used credit karma and have applied for pre approved loans as well as credit cards only to be declined. How do I participate in this lawsuit? And will credit karma users be notified other than reading this article?

Kathy
September 06, 2022

How do I file a claim on this lawsuit against credit Karma. I have done several of there pre-approval applications for credit cards and auto loans within this time period only to be denied and then the hard inquiries lowered my credit score every time.

Jerame Copelan
September 06, 2022

I too was a victim to this it crashed my credit score and Credit Karma has a different credit score than fico and everyone else tried to get numerous loans but was denied.credit lenders do not recognize Crdit Karmas score.now my credit score is lowerd so bad I don't know if I'll be able to recover.

Joann Jackson
September 06, 2022

I received many preapprovals and applied. All denied. Credit Karma is supposed to help you but only makes your credit look worse.

Terri
September 06, 2022

I fell for the credit karma lies also. I applied for cards and loans because they said i was approved. I got invited yesterday to apply for a loan through them. Please help

Mel
September 06, 2022

How do we get added because this is not rt

Dorothy
September 06, 2022

They did this to me, Them and another credit co. I've called the FTC I've called everyone about it for years. So who are the Customers they are paying out. And how does a Women like myself file my claim. Oh let me guess. You don't I'm just a victim. Get used to it Lady...You are nothing to us even the Recalled Prescription Medication slowly killing my body , every State gets millions, Myself, several surgeries, depression, just a victim.. so let's get this right. The FTC and Attorney General file lawsuits on behalf of the victims, they get the money but the victims get nothing but pain, suffering, and the terror of knowing that no one , absolutely the no one and especially the ones with Titles for consumers or for the People are a complete Fraud and It's not worth it to report anything because you will never be compensated, but you maybe retaliated against.
Thank you.
For all you do and don't do.
God watches

Algienee Rucker
September 06, 2022

I was very disappointed when I was denied for a "pre-approved" loan and credit card. I definitely want to be a claimant on the suit.

Dorothy
October 04, 2022

They did this to me, Them and another credit co. I've called the FTC I've called everyone about it for years. So who are the Customers they are paying out. And how does a Women like myself file my claim. Oh let me guess. You don't I'm just a victim. Get used to it Lady...You are nothing to us even the Recalled Prescription Medication slowly killing my body , every State gets millions, Myself, several surgeries, depression, just a victim.. so let's get this right. The FTC and Attorney General file lawsuits on behalf of the victims, they get the money but the victims get nothing but pain, suffering, and the terror of knowing that no one , absolutely the no one and especially the ones with Titles for consumers or for the People are a complete Fraud and It's not worth it to report anything because you will never be compensated, but you maybe retaliated against.
Thank you.
For all you do and don't do.
God watches

FTC Staff
October 05, 2022

In reply to by Dorothy

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.

As
October 04, 2022

How do we get compensated? Like do they have a list? They continuously screwed my credit with that pre approval garbage. I finally stopped applying just to be denied once I realized what was going on. Where do u make a claim or do they know who we are?

Patience
September 06, 2022

Same thing happened to me!! I too, was "pre-approved".
They left me with NEGATIVE time - that I can not get back. Then, NEGATIVELY affected my overall credit score by doing the hard pull. Then, denied me anyway. THAT made/is making it difficult to be actually approved from other subsequent credit card applications. So what was I "pre approved" for exactly!? Pre approved for the OPPORTUNITY to APPLY for a credit card? I mean how are they trying to even spin this? Pre approved to be ALLOWED to "fill out" a credit card application? Wow. I should be so lucky!!i really hope I'm "pre approved" for many more!!!!

Patience
October 04, 2022

Same thing happened to me!! I too, was "pre-approved".
They left me with NEGATIVE time - that I can not get back. Then, NEGATIVELY affected my overall credit score by doing the hard pull. Then, denied me anyway. THAT made/is making it difficult to be actually approved from other subsequent credit card applications. So what was I "pre approved" for exactly!? Pre approved for the OPPORTUNITY to APPLY for a credit card? I mean how are they trying to even spin this? Pre approved to be ALLOWED to "fill out" a credit card application? Wow. I should be so lucky!!i really hope I'm "pre approved" for many more!!!!

FTC Staff
October 05, 2022

In reply to by Patience

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.

Cloud ct
September 06, 2022

Making me have more hard inquiries than I wanted.how do I get in on this law suits

Richard R
September 06, 2022

How do I, &/or the rest of us who have applied & been denied for so called pre-approved cards, get to be a part of th settlement? Will our credit scores also be given back the points taken from the inquiries? Do we have to do anything ?

ASG
September 06, 2022

I thought Credit Karma was a true company who took care of their clients. I was also offered the pre-approvals, not only for credit cards but also for auto loans. Of course I was denied each time I applied. I have since learned to ignore those offered by Credit Karma because each time I apply, it decreased my credit score,

Nancy DePaolo
September 06, 2022

Constantly told I was pre approved and referred me to many very high interest credit card offers that supposedly I would definitely be approved for