In the Matter of Credit Karma
Case summary
Credit Karma was fined for using false "pre-approved" claims, to entice consumers into applying for credit card offers they often did not qualify for.
Our analysis
The Federal Trade Commission took action against the credit services company for employing dark patterns to falsely represent that consumers were "pre-approved" for credit card offers online.
-Credit Karma used enticing claims of being "pre-approved" and having "90% odds" to encourage consumers to apply for offers, even though many of them ultimately did not meet the qualifications. In reality, a substantial number of consumers who received and applied for these "pre-approved" offers were subsequently denied approval after undergoing the financial product companies' underwriting review process.
-Furthermore, a significant portion of applicants were denied approval due to disqualifying financial and credit characteristics, such as insufficient credit histories, account charge-offs, and bankruptcies. These deceptive practices led to violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
Outcome
Credit Karma is ordered to cease making misleading or unsubstantiated claims about approval, including pre-approval, and consumers' likelihood of approval. The company is also mandated to pay $3 million in monetary relief to consumers who applied for the offers mentioned in the complaint. Additionally, to deter future deceptive practices, Credit Karma must retain records of market research, behavioral studies, psychological research, user testing, customer feedback, and usability testing, including any A/B testing.
Parties
Federal Trade Commission and Credit Karma, LLC