FTC Forces Credit Karma to Pay Millions in Compensation for Misleading Credit Card Offers

More than 50,000 customers of Credit Karma will soon receive financial compensation in the form of checks or PayPal payments after the Federal Trade Commission (FTC) ordered a $2.5 million settlement. This decision stems from an FTC action in 2020 against the financial app, which was acquired by software giant Intuit that same year. The allegation: Credit Karma misled consumers with premature promises of credit card approvals. According to the FTC, Credit Karma falsely claimed that consumers were 'pre-approved' for credit card offers for which they were not actually qualified. As a result, the company agreed to cease such claims and pay $3 million to compensate the affected customers. Last Thursday, the FTC announced that over $2.5 million would be distributed among 50,994 customers. Between February 2018 and April 2021, about one-third of the consumers who applied for supposedly 'pre-approved' offers were ultimately denied. This not only wasted consumers' time but also negatively impacted their credit scores. The FTC found that Credit Karma cleverly concealed the rejections or falsely promised 90 percent approval chances. Quotes from training documents suggest that the company was aware of the deception. 'Credit Karma's false pre-approvals cost consumers valuable time and led to unnecessary credit checks,' said Samuel Levine, Director of the FTC's Bureau of Consumer Protection, in 2022. He assured that the FTC would continue to take action against digital deception. In addition to the financial obligation, Credit Karma must now ensure not to make misleading statements about pre-approvals and maintain relevant records. Credit Karma has not yet responded to requests for comment. In a previous statement to CBS MoneyWatch, the company emphasized that it strongly disagreed with the FTC's allegations, pointing out that these only pertained to statements that were discontinued years ago. Additionally, the company clarified that they do not make credit decisions themselves, as they are not a lender.