The Federal Trade Commission has ordered credit services company Credit Karma to pay $3 million to its users for pushing “pre-approved” credit card offers.
Credit Karma used claims that consumers were “pre-approved” and had “90% odds” to entice them to apply for offers when the customers did not actually qualify for them, the FTC said. From February 2018 to April 2021, the offers promoted by the company lead consumers to apply for credit offers and incur damage to their credit scores if denied, the agency announced in a press release.
“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”
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Credit Karma used customers’ personal information to send targeted advertisements and recommendations for financial products, such as credit cards, to its consumers, according to the release.
The company was also aware its customers were being misled, according to the FTC. Credit Karma’s customer service training materials were cited in the complaint, and a common question representatives would receive from customers was, “I was declined for a pre-approved credit card offer …. How is that possible?!?!?!”
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The FTC also ordered Credit Karma to stop deceiving its consumers and to preserve its records of any market, behavioral, or psychological research it conducts.
At least one credit card company told the FTC that “the Company does not preapprove, prequalify, or preselect consumers to whom to offer the [company’s credit card] via Credit Karma,” according to the complaint.
