WASHINGTON, D.C. — Credit Karma will have to pay out $3 million to users after the Federal Trade Commission said the company used claims that consumers were “pre-approved” for credit card offers to entice them to apply for offers they did not qualify for.
“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.”
The company provides tools for individuals to monitor their credit scores.
According to the FTC’s complaint, Credit Karma knew that its purported “pre-approvals” conveyed false “certainty” to consumers, based on the results of experiments, also known as A/B testing, showing that consumers were more likely to click on offers saying “preapproved” than those saying they had “excellent” odds of being approved.
In response to the FTC ruling, executives for Credit Karma said, “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,” said Susannah Wright, Chief Legal Officer at Credit Karma. “Our industry-leading technology provides the transparency our members need to shop for financial products with more confidence.”