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.
So this is all well and dandy... but as consumers. When is our recourse going to be made public?
Where do we go and file claim?
I’m in the same boat as the rest of you.I applied numerous times for pre-approved cards only to get rejected and have my score drop! Please let me know how to claim.
They told me to go after certain credit cards that I should be pre-approved it turned out not to be how do I get on to this class action lawsuit
I to was a victim of this I have tried so hard to build my credit and then they set me up . Never knew how important it is to have good credit a little to none hard inquiries but just when u think u found something u can trust this pops up now I'm having to fix my credit again . Lead me in the direction to handle this situation please and thank u
I am a victim of this deception. I have applied for a pre approved credit card several times to only be denied. How do I become a part of this lawsuit?
I am a victim Iv been using credit karma for years n was sent pre approvals which in results I wasn’t pre approved n got denied for many years
Wow… can’t believe how many people fell for this scam. This class action will payout near nothing based on the amount of responses here.
I was a victim of Credit Karma as well. Credit Karma indicated I 100% approval rate for a loan but using the company they suggested I was denied and had a hard inquiry on my credit report.
I was also denied.
This happened to me too. Dropped my score when debt was paid off as well.
Same applied for plenty of there credit cards how to I fill out a form
They sent me emails stating I was approved then I applied I got denied
I am an victim of Credit Karma. I was told I was pre-approved for Capital 1,Discover and others. Then I submitted my application & was denied. Capital dropped my score over 60 points,Discover over 20 points down I believe & the others,I truly don't remember how many points but alot. They have to own up to what they done to not just me but Thousands of people.
In reply to I am an victim of Credit… by Siheme Holloway
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.
Credit Karma told me that I had great approval odds only to be declined or stuck with having to pay a deposit for various credit card offers. After which the hard inquiry hit my credit report
I was told that I had outstanding approval offs only to be declined for offers as well as receiving point deductions on my credit score for hard inquiries
I was victim of pre approval for cards and loans which when I applied I was denied then took a hard inquiry for which I wish I could remove because it has affected my credit score by approximately 40 points taking me below 800+ which I had prior to applying for things I was denied.
Credit Karma, is still doing it. Just a few months ago. I received 3 credit cards in the mail that were in my name. I never put in an application for. Plus they were already active in my name. I have a recent a bankruptcy on my credit. I don’t remember putting in an application.
I was affected by this practice within the last 30 days. It is outside of the dates identified so how do I include myself in payment settlement? I attempted to file a complaint with the CFPB and the company responded that my complaint falls under this action but it doesn’t as the dates of the false credit card referral was outside of the dates above. It is now an unnecessary hit on my credit and I was denied despite “excellent” approval odds.
I too applied for credit cards, auto loan and loans through Credit Karma only to be turned down and my credit score dropping tremendously❗️ So I now I just ignore their adds and emails.
I was also a victim of this. I applied many time and was denied each time.
I was a victim I applied for several credit cards that said I had a 90% approval on and was denied
I was given pre approvals and when I applied I was also denied for credit card and auto refinance. I was promised a 50 dollar Amazon card and I never received it. I hope I can be compensated for all the false hope they give me an others that's looking to make their credit better.
Denied for credit cards and loans when I was guaranteed a loan or credit card.
Credit Karma’s failed to complete my taxes in 2016. That started my tax problem then.
In reply to Credit Karma’s failed to… by dennis M hines
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.
I was misled by Credit karma several times 1 st on pre approval of credit card that was false in 2017 also I disputed account info that was illegally reported in 2019 and I paid the amount trying to save my credit I was told by Kredit Karma I was approved for a Auto loan with Capitol 1 in 2020 Kredit karma completely deceived me and They still have all my information I totally didn’t understand this process I pray all of us that have been scammed are compensated for the distress I think that they leaked and sold my info a thousand times.
They did this to me multiple times the last couple years
I also had my credit checked using credit karma when they said pre approved I was denied by lenders
The hard inquiry is still on my report
I was a victim of Credit Karma preapproval scam. I was preapproved for several credit cards, then when I applied, I was denied. Each time they checked my credit which in return caused a decrease in my credit score. I am expecting to be compensated from the results of this lawsuit.
I’ve filed my complaint and added my address I hope to be compensated for the lies credit karma has been telling and causing my score to continuously fluctuate because of “pre approved offers” for years I’ve dealt with it
Yes, I was a victim also. Credit Karma sent me email notices to apply for credit and I did but was denied. Stating I had great, high approvals to be accepted for credit card when I wasn’t.
Sincerely,
Ms. Caldwell
I have applied for several credit cards based on Ore-Approvals and had my score drop by 23 points! I have been with them now for about 3-5 yrs! And I am livid at this scam to lure us in!
In reply to I have applied for several… by Tabitha Banks
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.
I was a victim as well they kept saying it was the only way to improve my credit and the amounts that I was to get was not so it became a revolving door and a complete lie my credit score were said to become higher they did not they were hard inquiries that went on my credit as well yes please stop this absolutely false deception they have been peddling for years the amounts were no where close to what was said its a scam and peddled to a class of people already hit the hardest
I feel for the pre approval through credit karma as well. Nothing like sorry you were not approved. I also notice that credit karma says your credit scores higher than what it really is. That is false hope as well.
I have applied for cards with credit karma several times with several denials. Even with deposited money as collateral. Nobody needs to deal with denial of secured credit cards when you can go to the bank that you deal with and get two or three. What's really bad is getting one even finally approved with credit One and then when you go to try to get a second one they pay off the first one and everything keeps ruining your credit. Credit classes and bankruptcy classes taught me that you need two credit cards to build your credit faster and yet credit karma has hurt me more than help. The only thing I found good with them is getting a general notice without credit for what your credit score is. Always know that it is lower with credit karma then any other credit report
I was a victim too and sadly. The amount of people will amass to over 3 million. We'll be lucky to get a $1.00
I too am a victim, advised of credit approval to be denied. How do I sign up
I too was denied many times for credit cards. And it dropped my credit score.
I applied for a pre approval for Capital One through credit karma and was denied. It’s said how they prey on people that is trying to do better
Since 2019 and maybe even before I have been gotten by credit karma at least 5 to 7 times. Three times within the last year I know and it didn't mess my credit score up.
I applied for these offers with credit karma. How can I get contact information on the lawsuit payout?
Who do i contact for the class action/
Same happened to me several times! Eventually I learned not to apply because it was inaccurate information. Also! When they show you “” if you pay this debt your score will go up 26 points if you settle it will go up 23 points””that’s false info!
This happened to me several times
I was told by credit karma that I had outstanding chances to get a personal loan with one main financial services only to be declined when I applied.
Credit Karma indicating that I got a 600$ loan and majorly impacted my credit to 0 yet... WHERE'S the LOAN? I'm literally confused right now and will be appealing this
I was pre approved for outstanding for a credit card but when I applied I was denied causing my score to drop. I was so confused.