FTC orders Credit Karma to pay $3m for “misleading” consumers
The Federal Trade Commission (FTC) has ordered credit services company Credit Karma to pay $3 million for allegedly misrepresenting consumers with “pre-approved” credit card offers.
It alleges that from February 2018 to April 2021, Credit Karma claimed consumers were “pre-approved” and had “90% odds”, making them apply for offers that, in many instances, they did not qualify for, resulting in potential damage to their credit scores.
The US consumer watchdog has demanded the firm pays up $3 million, which it says will be sent to consumers who were affected by Credit Karma’s “misleading” claims. It has also ordered it to “stop deceiving consumers” and preserve records to help prevent further deception.
Founded in 2007, Credit Karma claims to have more than 120 million members in the US, UK and Canada. It offers free credit scores and credit reports, as well as financial services such as identity monitoring, applying for credit cards, shopping for loans, auto insurance, savings accounts and checking accounts through its bank partner, MVB Bank.
“We fundamentally disagree with the FTC’s allegations about marketing terms that aren’t even in use anymore, but ultimately we reached this agreement to avoid disruption to our mission and maintain our focus on helping our members find the financial products that are right for them,” says Susannah Wright, chief legal officer at Credit Karma.
The firm adds that it only gets paid when members are approved for credit cards and personal loans and “receives no compensation” when members are denied.