FTC - Credit Karma

[**UPDATE**](https://www.ftc.gov/news-events/news/press-releases/2024/10/ftc-sends-more-25-million-consumers-deceived-credit-karmas-allegedly-false-pre-approved-credit) On the 31th of October 2024, the Federal Trade Commission declared that it will be distributing over $2.5 million to nearly 51,000 consumers who were misled by Credit Karma to compensate them for time wasted applying to offers from the company. - The FTC took action against Credit Karma in 2022, accusing the company of falsely telling consumers they were “pre-approved” for credit cards with “90% odds” of approval, despite many being denied. Under a settlement, Credit Karma agreed to halt these misleading practices and compensate affected consumers. The FTC filed a lawsuit against Credit Karma in 2022 claiming the credit company used dark patterns to lead consumers to take actions in the company's favor despite potential consumer harm. - Credit Karma’s interface, designed using A/B testing, showed that terms like “pre-approved” boosted clicks more effectively than alternatives like “excellent” approval odds when in fact, a substantial portion of consumers were denied after applying. According to the FTC, Credit Karma violated Section 5 of the FTC Act by misleading consumers about their approval odds. This deception led about one-third of applicants to be denied for such offers, often with information about potential denial hidden in disclaimers. - The FTC further claims that consumers suffered tangible harm from these misrepresentations. Many wasted time applying for credit they were unlikely to receive, and the “hard inquiries” associated with their applications often lowered their credit scores. This impacted their eligibility for other financial products, causing lasting effects on their financial options.