Credit Karma will pay $3 million for bogus preapproved offers
Credit Karma will pay $3 million for bogus preapproved offers, After pushing people to apply for fraudulent preapproved credit cards and causing damage to their credit scores, the Federal Trade Commission has ordered Credit Karma to pay its users a total of $3 million in restitution.
After submitting their applications for credit cards that Credit Karma, a company that monitors credit, stated they were preapproved for, nearly one-third of consumers had their applications rejected after a credit check was performed. The Federal Trade Commission (FTC) alleges in a complaint that the marketing activities resulted in consumers wasting their time and had a detrimental effect on their credit ratings.
Dark patterns are marketing strategies that are aimed to fool people into completing particular activities, such as applying for a credit card that an individual is reportedly preapproved for. The Federal Trade Commission (FTC) is reportedly taking stronger action against deceptive business practices that “hurt consumers and contaminate internet commerce.”
The FTC complaint alleges that Credit Karma violated the Federal Trade Commission Act at some point between February 2018 and April 2021 by promoting products that consumers were either “Pre-Approved” for or had “90% odds” of approval for but ultimately were not qualified for. This occurred at least between February 2018 and April 2021.
Samuel Levine, the director of the Bureau of Consumer Protection at the Federal Trade Commission, stated in a news release that “Credit Karma’s deceptive promises of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks.”
The complaint states that Credit Karma was aware that its business practices could be misinterpreted by customers. For instance, “confusion concerning pre-approval” is listed as a regular issue that customers bring up in the training materials that are provided for customer care personnel.
Users are required to provide personal information in order to make use of Credit Karma’s services. This provides the company with access to more than 2,500 data points — including information on the consumer’s credit and income — related to the user. The corporation makes use of the information in order to tailor marketing efforts for the individual, which may include suggestions for preapproved credit card and loan applications.
However, according to the lawsuit, one credit card company stated to the FTC that “The Company does not preapprove, prequalify, or preselect individuals to whom to offer the [Company’s credit card] via Credit Karma.” This statement was made in response to the allegations made in the complaint.
Credit Karma will be required to make a payment to the FTC in the amount of $3 million, and this money will be distributed to customers who were negatively impacted by the deceptive business practices. According to the news release, the company will also be required to avoid misleading customers about the approval status of credit offers. This requirement will be established by an order that requires Credit Karma to keep records of the marketing efforts they do.