FTC asks Karma for credit to stop fake credit offers
Federal Trade Commission (FTC) regulators voted unanimously on an agreement Thursday that ordered Credit Karma to pay $3 million to consumers for misleading them with promises of credit card “pre-approvals” despite knowing those guarantees were not real. The order requires that the company stop making such allegations in the future and requires additional record-keeping efforts to ensure that “dark patterns” are not used to push users into making poor decisions in the company’s favour.
- The FTC complaint alleged that Credit Karma intentionally misled its users into applying for credit cards.
- This scam has been going on for more than three years, using ‘dark patterns’, during which users waste time on apps and damage their credit scores.
- As a result, Credit Karma must pay affected users $3 million and stop misleading users through “informed consents” and the use of “dark patterns.”
FTC: Credit Karma used data to mislead consumers
As a credit services company, Credit Karma has long positioned itself as an easy way for the average consumer to keep track of their credit score and apply for a range of financial products. One such product is credit cards. With access to more than 2,500 data points including personal income and credit rating, the FTC said Credit Karma then used that information to send targeted ads to credit cards and other financial products.
According to the FTC complaint, Credit Karma violated Section 5 of the FTC Act from February 2018 to April 2021 by sending ads telling users they were “pre-approved” for certain credit card offerings even though outside lenders had not yet reviewed any Financial information. As a result, nearly a third of the applicants for these offers were rejected.
While a credit card refusal does not harm your credit score, Difficult inquiry while applying is. The Federal Trade Commission suggests that what Credit Karma was doing was intentional.
“Credit Karma’s false claims about ‘prior approval’ cost consumers time and subject them to unnecessary credit checks,” said Samuel Levine, director of the Federal Trade Commission’s Office of Consumer Protection. consumers and pollutes online commerce. “
The Federal Trade Commission describes the term dark patterns as how user interfaces “can have the effect, intentionally or unintentionally, of obfuscation, subversion, or harm to consumer independence, decision-making, or choice”.
According to the FTC’s complaint, Credit Karma knew that its interface drew users into those “pre-approvals”. To combat this, the FTC requires Credit Karma to keep extensive records about any relevant research or exam.
After the FTC’s decision, Susanna Wright, chief legal officer at Credit Karma, said the company made an exception to the commission’s allegations, but accepted the agreement to continue uninterrupted work.
“We fundamentally disagree with the FTC’s claims about terms of marketing that are no longer in use, but we eventually came to this agreement to avoid disrupting our mission and to maintain our focus on helping our members find the right financial products for them,” Wright said. .