FTC orders Credit Karma to pay consumers $3M in settlement

Sept. 6 (UPI) — The Federal Trade Commission is ordering credit monitoring company Credit Karma to pay a collective $3 million back to its prospective customers, the commission confirmed in a news release Tuesday.

The deal between the FTC and the San Francisco credit monitoring company is to settle claims the company misled consumers with false promises of pre-approval for credit offers.

“The FTC alleges that the company used claims that consumers were ‘pre-approved’ and had ‘90% odds’ to entice them to apply for offers that, in many instances, they ultimately did not qualify for,” the commission said in a news release.

The commission’s order requires the company to send $3 million to consumers who spent time applying for credit cards. It also forces Credit Karma to “stop making these types of deceptive claims.”

Nearly a third of users who applied for credit cards labeled as pre-approved were later denied after a credit check. The credit checks ultimately had a negative impact on consumers’ credit scores, according to the FTC complaint.

Credit Karma’s tools allow consumers to monitor their credit scores and reports.

To use the company’s services, consumers must provide a host of personal information, allowing the company to collect more than 2,500 data points per person, including credit and income information.

“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection said in a statement.

“The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”

While acknowledging the settlement, the company disagreed with the allegations.

“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,” Credit Karma Chief Legal Officer Susannah Wright said in a statement.

“Our industry-leading technology provides the transparency our members need to shop for financial products with more confidence.”