Have you ever been turned down for a credit card that Credit Karma claimed you were pre-approved for? If so, you’re far from the only one.
Credit Karma is in legal trouble because it was pushing supposedly “pre-approved” credit cards on customers who then got rejected by credit card companies, hurting their credit scores, according to the Federal Trade Commission. The FTC is ordering the popular credit monitoring service to pay $3 million to customers who were affected.
“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levinedirector of the FTC’s Bureau of Consumer Protection.
Nearly one-third of the people who applied for credit cards that were labeled as “pre-approved” were subsequently denied following a credit check.
The FTC alleges that, from February 2018 to April 2021, Credit Karma falsely told many consumers that they had been “pre-approved” for certain credit cards, or that they had “90% odds” of qualifying for the cards. That enticed users to apply for credit card offers that they ultimately didn’t qualify for. This had a negative impact on their credit scores, the FTC said.
The agency’s order requires Credit Karma to pay $3 million that will be sent to consumers who wasted time applying for these credit cards. It also orders the company to stop making these kinds of deceptive claims. The FTC hasn’t said how those consumers will be identified.
In response, Credit Karma said“We fundamentally disagree with the FTC’s allegations about marketing terms that aren’t even in use anymore,” but that it reached an agreement with the FTC so it can get back to helping customers.
“The FTC’s allegations are focused on Credit Karma’s historical use of the term ‘pre-approved’ for a small subset of the credit card and personal loan offers available on Credit Karma’s platform prior to April 2021, and do not…