NEWS UPDATE: FTC Files Lawsuit Against Credit Karma

Have you recently seen that you were “pre-approved” for a credit offer through Credit Karma? If so, you may be a victim of their deceptive claims.

The Federal Trade Commission (FTC) published a press release on September 1st, 2022, addressing the action they have taken against Credit Karma for falsely stating their users were “pre-approved” with a “90% odds” of being approved for credit they wound up being unqualified. The FTC found that one-third of these “pre-approved” offers ultimately resulted in denials from February 2018 to April 2021, which consumers claimed was harming their credit scores.

As a result, the FTC ordered that Credit Karma pay $3 million to those who wasted their time applying for these credit cards to only be denied and defer the company from making these false claims in the future. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, stated in this press release, “Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks. The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”

Credit Karma was aware that by labeling credit offers as “pre-approved,” consumers were more likely to click on the offer, which they discovered through A/B testing. Since Credit Karma receives a commission for every application approved, they found falsely labeling their credit card offers in this manner was a way for them to increase the payouts they were receiving.

Upon this discovery, the FTC ordered Credit Karma to stop deceiving customers, pay the $3 million to the FTC to be later dispersed to the affected consumers, and preserve their records to prevent future deceptive patterns.

You can read the full press release from the FTC here.