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Credit Karma ordered to pay users $3 million for 'false' pre-approved credit card offers

The FTC complaint says Credit Karma users wasted time and damaged their credit scores when they applied for offers they weren't actually 'pre-approved' for.

WASHINGTON — Credit Karma has been ordered by the Federal Trade Commission to pay its users $3 million for "falsely" making some of them believe they had been pre-approved for credit card offers.

The FTC alleged that, from Feb. 2018 to April 2021, Credit Karma used claims that consumers were "pre-approved" and had "90% odds" of approval to try and convince them to apply for credit cards that many didn't actually qualify for. 

The FTC complaint stated that nearly one third of consumers who applied for those "pre-approved" offers were denied, further hurting their credit scores. It's unknown how many people were affected in total.  

Credit Karma said Thursday it disagrees with the FTC's allegations, but reached the agreement "to avoid disruption to our mission and maintain our focus on helping our members find the financial products that are right for them." 

The company added that the allegations focused on "marketing terms that aren’t even in use anymore." 

While Credit Karma allows users to monitor their credit info for free, it gets paid when customers are approved for loans or credit cards.

The FTC complaint alleged that when consumers applied for the "pre-approved" offers, third party financial companies would make a 'hard inquiry' on their credit reports, which wound up lowing consumers' credit scores. 

“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.”

The FTC's order states that the $3 million should go to consumers who wasted time applying for the credit card offers. It's not yet known whether there will be a specific criteria for which Credit Karma customers receive reimbursement. 

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