FTC orders Credit Karma to pay deceived consumers $3 million

This ruling comes as a result of an investigation into Credit Karma's misleading advertising practices, which promised users free access to their credit scores without adequately disclosing the terms and conditions.

Credit Karma is a free credit monitoring service that allows users to check their credit score and view their accounts. It’s a beneficial tool, but since September of 2022, the Federal Trade Commission (FTC) has complained about Credit Karma deceiving their consumers. The FTC’s role is to promote competition and protect and educate consumers, which they take very seriously. As a result, the FTC has made orders that they expect Credit Karma to follow in order to prevent further deception.

How did Credit Karma deceive the consumers?

According to the FTC, Credit Karma made false claims when notifying consumers that they were “pre-approved” for credit cards. In majority of these instances, the consumers were misled and did not qualify for the credit cards. “For many of these offers, almost a third of consumers who received and applied for the ‘pre-approved’ offers were subsequently denied based on the financial product companies’ underwriting review,” the FTC says. They also stated that Credit Karma has wasted consumers’ time and potentially damaged their credit scores.

What is the FTC doing to take action against Credit Karma?

In any circumstance, the FTC has the authority to take action against companies that are participating in unfair and deceptive acts or practices. The FTC doesn’t approve of Credit Karma’s actions and has since ordered them to:

  • Stop deceiving consumers: This prohibits Credit Karma from claiming a consumer is pre-approved or how likely they are to be approved if they apply.

  • Preserve records: This requires Credit Karma to preserve records of any behavioral or psychological research, interviews, surveys, clickstream analysis, or mouse-tracking studies in order to prevent the use of deceptive patterns

  • Pay $3 million in consumer redress: This requires Credit Karma to pay $3 million to the FTC, which would then be sent to consumers who were affected by the company’s actions.

What was Credit Karma’s response to the order?

Credit Karma has since disputed the FTC’s claims and stated “We fundamentally disagree with the allegations the FTC makes in their complaint. We do not engage in so-called ‘dark patterns’, there is no mention of this at all in our agreement and their suggestion is entirely baseless.” Regardless, the FTC has finalized the order, as the Commission has voted to approve it.