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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 鶹ý 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.

Mrs meyers
September 22, 2022

In reply to by kanzaydia akil…

That’s what I want to know did you find out how to?

David B Goodman
September 22, 2022

In reply to by kanzaydia akil…

Been there had same thing happened to me Multiple times

FTC Staff
October 05, 2022

In reply to by David B Goodman

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at . 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.

David B Goodman
October 05, 2022

In reply to by kanzaydia akil…

Been there had same thing happened to me Multiple times

cleopatra
September 30, 2022

In reply to by kanzaydia akil…

Yes how do submit a claim because I was told the same thing. Had me going through all that for what. All my info went to them.

Jamiee L Booher
September 06, 2022

In reply to by Vivian Butler

I received pre approval and once applied was denied and now have lower credit score. I'm done using credit karma and expect them to compensate me.

Youlanda Thomas
September 30, 2022

In reply to by Jamiee L Booher

Yes same thing happened to me.I was told I was approved for a loan from lending tree and was not!

Tj kerr
September 30, 2022

In reply to by Vivian Butler

I was not approved for several credit cards that credit karma said that I would be approved for over work over the last many years

Darnell Williams
October 14, 2022

In reply to by Cindy D McDaniel

I too was told by Credit karma l was pre-approved for a loan, and. Credit cards, and denied for both. Credit score went down.

Dina Ware
September 30, 2022

In reply to by Vivian Butler

Hello this has happened to me many of times with Credit Karma from Loans to refinance credit card and PreApprovals. It's not fair to us with claims from false advertising that's not to decrease of credit scores. Better yet when you got to the car lot to purchase a vehicle to find out your score it is not what Credit Karma says now your credit score is all jacked up from being run 40 Times and your score has dropped dramatically. Not fair

FTC Staff
October 05, 2022

In reply to by Dina Ware

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at . 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.

michael henderson
September 30, 2022

In reply to by Vivian Butler

This also happened to me
Now I'm very hesitant to pre approved offers

Keyunta Westbrook
September 30, 2022

In reply to by Vivian Butler

I am so happy they Caught on to them give me the same way

Andre Stephens
September 30, 2022

In reply to by Vivian Butler

I was a victim of Credit Karma giving me preapprovals to refinance an auto loan, along with pre approved credit cards on my credit report and when I applied, I was denied over and over. I stopped applying now for the preapprovals. My credit was checked more than twice and caused a major decrease in my credit score since 2019. I expect to be compensated from the results of this lawsuit and I may stop using Credit Karma altogether until my credit is properly fixed and matters are resolved immediately!

Robert Kingman
September 30, 2022

In reply to by Vivian Butler

This just happened to me TODAY. I was lead in with promise of way lower rate and when applied I got a higher rate then I am paying now!?!?!?

Todd H.
September 30, 2022

In reply to by Vivian Butler

Same here. But no one has reached out to express that I'd be included in the lawsuit.

Marla McDill
September 30, 2022

In reply to by Vivian Butler

My mouth dropped when I read about this lawsuit. I always thought it was odd how my approval ratings were great but would still get denied. I would make excuses in mind to make it make sense. I'm glad someone brought light to this situation because it affects people in more ways than people can imagine.

Richard Combs
September 30, 2022

In reply to by Vivian Butler

I have to admit, I was also lured into harming my credit a few times in times of need with these "90% approval" chances. Count me in on that payout!

Tina
September 30, 2022

In reply to by Vivian Butler

Just happened to me again.......I have 3 hard inquiries for the same company 3 different years cause credit karma said my approval odds were GREAT how can I be part of this laws suit

Ernestine Williams
September 30, 2022

In reply to by Vivian Butler

I was a victim of this scheme and it damaged my credit. I was also turned down after the pre-approval stunt!

Jose Arias
September 30, 2022

In reply to by Vivian Butler

Do you need to register for this? Because that also happens to me

Conchita Hamilton
September 30, 2022

In reply to by Vivian Butler

The same thing happened to me when I was working with credit karma I was given the you are preapproved notification to apply for credit cards and an auto loan But when I went to apply for it I was denied for all of it and my credit score went down and I was given a soft and hard Inquiry for just doing that I stopped using them after them incidents and They still contact me through email about the offers

Barney
September 30, 2022

In reply to by Vivian Butler

I just went through the same exact thing, sucked me in with a 5.5 interest got an offer of 9. And still got denied . On my brand new truck. Now my score has suffered.

Mayla Grant
September 30, 2022

In reply to by Vivian Butler

This also happened to me and I never got approved for any type of loans and it made my credit score go down so how will I get something out of it

Dorothy Brown
September 30, 2022

In reply to by Vivian Butler

I was a victim of Credit Karma's deceptive practices. I applied for a "pre-approved" credit card in 2018, and was denied. My credit also effected. I then reapplied in 2020, and was approved, but my credit did take a hit. How will be included in the lawsuit?

Ryan Duff
September 30, 2022

In reply to by Vivian Butler

This happened to me multiple times within that timeframe! Now I have 9 hard inquiries on my credit!!

Georgina Wicker
September 30, 2022

In reply to by Vivian Butler

I was a victim of credit karma’s pre-approvals on personal loans and credit card once I applied I was also denied so I no longer pay attention to the pre-approvals they suggest or hardly use the app anymore

FTC Staff
October 05, 2022

In reply to by G.Webb

If you were denied for a “pre-approved” credit product advertised by Credit Karma, report it to the FTC at . 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.

Chiquella Tucker
September 30, 2022

In reply to by Vivian Butler

I also was a victim of falsification obligations. I now several hard inquiries on my credit report due to pre-approval ads.

Jonathan Mauney
September 30, 2022

In reply to by Vivian Butler

Yes it has repeatedly told me as well I was preapproved then I try it and get 20 points knocked off my credit ... Got so many emails and would be hoping so I would try again u know wishful thinking kinda thing so wrong

Rebecca Giles
September 30, 2022

In reply to by Vivian Butler

Same here. I was denied numerous times for pre-approved offers. My credit score decreased each time. I used Credit Karma for 3 years. I stopped using the platform recently. They closed my account because for some odd reason they couldn't verify my identity. I've always been me, Credit Karma also tricked me into opening the account to begin with when I filed my taxes, misleading me. Credit Karma said I'd get my refund sooner & had a chance to win $20,000. Neither of which was true. I was under the impression I needed to open an account to win, not true. Also, I didn't get anything from Credit Karma but a declined Credit score and high hopes for Credit I wasn't actually pre-approved for. Credit Karma just got it's Karma for misrepresenting themselves in many ways.

Everett McCullough
September 30, 2022

In reply to by Vivian Butler

Same here they still telling me am available for a car line and house buying power of 55,000 did get approve

sheneka davis
September 30, 2022

In reply to by Vivian Butler

Happened to me as well it’s crazy I might stop using them as well.

SC
September 30, 2022

In reply to by Vivian Butler

They did this to me too. They lied and said Prosper (terrible company who.lied to me many times) could consolidate credit card debt with over 22 offers that were guaranteed approval. This company and ANY credit card company who works with credit karma should go to jail for fraud. It's tanks your credit score. Also, credit karma should ONLY tell you you can apply for a loan and under wage conditions you get approved. For example, how can a customer get a debt consolidation loan to improve their score when nobody will give it to them BECAUSE of the debt tanking your score? It should be mandatory any consumer who asks for a debt consolidation loan get one. Then their score would go up. It's a racket.

Kylah Williams
September 30, 2022

In reply to by Vivian Butler

My name is Kylah Williams. I have been falsely by Credit Karma . My credit score has dropped significantly. E
My credit score was at an 640 , now it is less than 520 . I am concerned about the safety of my credit score. Please assist soon !

Amber
October 06, 2022

In reply to by Vivian Butler

I had the same thing happen to me. Does anyone know if we have a form we need to fill out or a number to call? Or does the ftc have the info of all these instances with them?

Olivia Kim
October 06, 2022

In reply to by Vivian Butler

I was a victim of Credit Karma, I applied for a pre-approval that I applied for and was denied. I was told that it would be a soft enquiry on my credit report. It was not. My credit score went down 25 points. I contacted that company who denied me my Pre- approval , they told me it was because of my credit score. I told them my credit score was fine before they made the enquire causing my score to drop 25 points.... I want to be compensated as soon as possible. I will stop using Credit Karma for this deceptive behavior.

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