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 compliant illustration Credit Karma complaint illustration](/sites/default/files/styles/scaled_lg/public/ftc_gov/images/credit_karma_complaint_illustration.jpg?itok=0jfOlBXv)
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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Omg this happened to me last month!!!! How do we report this? I have Proof !
I recently have “ outstanding “ approval odds then I was denied, My score dropped 67 points
I have had the same problems with credit cards house loans and just for loans period and has brought my score down a lot after I worked so hard to bring it up
Yup same here I get emails constantly from Credit Karma telling to to check these credit cards I’m pre approved or approved for and end up just wasting my time and it affecting my credit score.
I get the pre approved credit card and even happened last month and when I applied for the card I get a message saying, Sorry we can't approve you at this time and leave enquiry on my credit.
There are multiple credit cards & loans that I was advised I'd be pre-approved for, also with them stating others with my similar credit score were approved, that I was also denied for, lowering my credit score everytime!
I was a victim of the credit karma pre approval making my scores drop.
How do o get in the settlement I was offered and denied and credit was pulled
In reply to How do o get in the… by Jennifer knower
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 of Credit Karma giving me preapprovals. 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 will stop using Credit Karma.
I still have inquiries dropping off my credit because of this
I too,was a "pre approved " victim of credit karma resulting in hard inquiries lowering my credit score.
What's the further process to take part in this claim?
this happed to me too, they always have a pre-approved and when I applicate it, I be always declined. and my credit scored lost some point.
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?
Yes I have been a member of credit karma for years I have applied for numerous cards that said i was pre approved and had great odds of being approved only to be denied killing my credit score how do I file a claim
for 2 1/2 years I relied on credit karma to help me build up my credit score buy applying for different so called pre approved loans and cards only now to find all they were doing was sabotaging my credit score not ever once did they tell me about pulling hard credit reports
I have had this happen many times through their system its disappointing and time wasted, also because I lost points on my credit because of the inquiries
I am also a victim of pre apprvd ofers that where not turn. I apply and bring my credit Rating down due to the inquiry. Based on false information provided by credit karma
I was also a part of this. Tried on either pre approved loans or pre approved credit cards. Also was told I had high probability of refinance and got a hard inquiry for it and was denied the refinance loan.
I too was an victim as well it took me years to get at a decent credit score. I am still having issues with getting loans and credit cards.
I've run into this multiple times in the past. was pre approved, followed all the instructions. Some took more time than expected to reach companies. Did all the connections on ss#, bank releases. More time than not I was denied for too low credit score. But said odds are high or good. You can build you score with out credit reports. Yet credit companies don't want to approved you for low scores
Had got pre approved for credit cards and auto loans went forward to applied and was denied immediately And because the inquiries made my score be effected negatively
I was a victim as well. Credit karma said I would be pre approved for a credit card. I was denied as soon as I applied & my score dropped.
I was also a victim of Credit Karma giving me a good pre-approval chance to an American express credit card on May of this year which I was denied once I applied so now it lowered my credit score which has cost me so much time to built. Now we are in September and it still continues to say that I have good approval chance of the same American express card but now I ignor the offers.
I was a victim of credit karma saying I was pre approved for loans and credit cards by outstanding odds and when I applied I was quickly turned down and my credit score shot down also which was unfair and so wrong because credit karma lied to me
I was denied multiple times applying for credit cards that “fit my credit score” My app still shows I can refinance my car for a cheaper car note & it’s paid off!! Like how?!??!!
I applied for about 4 cards and got denied for every one of them
I am a victim of this. Credit karma told me on numerous occasions that I was pre approved for credit cards and I applied and never got approved. My credit has gone from a 789 to a 504. This is wrong. I want to know how and will I be compensated for this disaster of bad business and false advertisement.
I also applied quite a few times to credit cards through credit karma claiming i was pre-approved and got denied every time, my credit score has dropped because of this, and due to applying so many times i am now unable to apply to more credit cards which I may have been approved for at other banks.
Credit Karma has suckered me into thinking I was approved for all types of credit cards with “very high approval odds” only to be declined!
I am a victim of Credit Karma for pre approved credit cards and auto loans. That hurt my credit score on a number of times. I would like to be compensated for the damages done.
In reply to I am a victim of Credit… by Diane Kennon
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 to was a victim.
I also have tried multiple times only to be rejected
I've applied several times rough their site for supposed pre-approved cards and now have several marks on my credit. It's ridiculous!
I was ..... By them also
I would like to know how to get paid for this lost 36 points on one inquiry not counting the other ones
I also have been misled by credit karma by pre-approved offers and have damaged my credit score. I hope to be compensated for my decreases in credit score that would never have happened if not for all the pre approved invites
I been with Credit Karma for years now. I been told numerous times that I been pre-qualified for loans,Credit cards,car loans,home loans,student londs,etc. I keep getting emails from Credit Karma about approved credit Cards. I get rejected, and My credit score is affected by the denial. My informations is sold to The Black Websites. Now my credit score is worse than before. I can't even get approved for a candy bar now. How do I get the claim forms to fill out? Please let me know.
In reply to I been with Credit Karma for… by Jennifer Simmons
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
Has cause my credit score go way down .Due too fact saying I was approved get refinanced for my car loan and got denied .Also said I was preapprove
For credit card when I was denied .And they really hurt my credit score .
This happened to me as well. Still currently trying to repair my credit as we type! I have a 568 due to a so called pre approved Credit One credit card through Credit Karma!!! Please help me at least repay this card so I can get a new house for my kiddos
I was also victim to apply for cards and loans sent to me by credit karma stating I was pre approved and was not causing damage to my credit
I to have fallen victim to this misleading information from credit karma. What steps do we take as the consumer to be apart of receiving the compensation?
This has happened to me with card and loan offers. Do I need to do anything
I had no idea I could file a complaint. Credit karma did this to me quite a few times and every time I was denied. And I found out later they were hard pulls which means they affected my credit. I genuinely had no idea
I have also been a victim of credit Karma unlawful practices.
In reply to I have also been a victim of… by Jeffery Butler
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.
Yes, this happened to me also. I do have a question.. Who send me Pre-approved credit products through the postal mail? These credit products are the same ones that I see on credit Karma. I can call (888)567-8688 to opted out.. but the call always gets dropped while trying to say my address details.
I received an auto loan, credit cards and loan pre-approvals, there was a hard inquiry on my credit and yet was still denied personal loans, credit cards and was told that my monthly car payment could be lower by more than half what I was paying. Just made an idiot of me.
Pagination