Credit Karma was recently fined $3M for offers that were allegedly false and misled users

By: April Carson



Credit Karma was fined $3 million for lying to customers and making them think they were "pre-approved" for credit cards, which in turn lowered their credit score.


On September 1, the Federal Trade Commission (FTC) took action against Credit Karma, a personal finances company servicing over 100 million users in America. The FTC states that Credit Karma convinced customers to apply for credit offers by saying they were "pre-approved" and had great "odds," even though lots of people never actually qualified.


Credit Karma also allegedly misled customers by inflating the "recommended credit limits" it gave them. The FTC found that this made people think they needed to spend more money to improve their credit score, when in reality, doing so could actually hurt their score.


The FTC has accused Credit Karma of "tricking" customers and ordered the company to pay $3 million in damages. According to the agency, nearly one-third of customers who applied for some of these "pre-approved" offers were denied. The money will be sent out to customers who allegedly wasted their time applying for these credit cards. In addition, Credit Karma must stop its deceptive marketing practices and preserve records related to its advertising campaigns.


Customers who applied for the company's offers between February 2018 and April 2021, believing they were "pre-approved," actually damaged their credit scores when they were denied. The FTC's complaint alleges that the company misled customers and issued false offers. Credit Karma has been fined $3 million for allegedly "tricking" customers with deceitful promises.


Having a bad credit score in the US can virtually ruin your life. A person with poor credit may have their loan applications rejected, be denied housing by landlords and end up paying way more for insurance premiums - even if they're healthy. Additionally, many employers will check your credit score during a background check, which could negatively affect your job opportunities.


Because of how important a good credit score is, there are many companies that claim to offer services that will help you improve your credit. However, not all of these companies are honest. In fact, some may even be scams.


According to a survey by YouGov and ScoreSense in 2019, more than half of Americans—53 percent—have been rejected for a credit card, loan or car due to poor credit. The pandemic led people to rack up even further debt, with 51 percent of adults adding to their credit balances during COVID-19, according to a 2021 report from CreditCards.com.


The Federal Trade Commission plans to put a stop to digital dark patterns that aim to deceive consumers, said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. These "dark patterns" use marketing manipulative techniques to get users to take specific actions without them realizing it.


The $3 million settlement is the largest fine the FTC has ever imposed on a company for using these types of dark patterns, Levine said. The FTC is also ordering Credit Karma to stop using the deceptive tactics and to get customers' express informed consent before enrolling them in new products or services.


The FTC's allegations, according to the credit-monitoring firm Credit Karma, "fundamentally disagree." According to CNBC , the FTC said TransUnion misled consumers by claiming that it was a ""FICO score"" even though it wasn't. The agency also claims that TransUnion and Equifax violated Section 5 of the Fair Credit Reporting Act, which prohibits deceptive acts or practices in connection with information from consumer reports.


Nonetheless, Chief Legal Officer Susannah Wright said that "avoiding disruption to our mission and maintaining our focus on helping our members find the financial products that are right for them is why we reached this agreement." Karma has also agreed to strengthen its compliance program and have an independent assessor review it every two years for the next 20 years.


"We are committed to maintaining the highest levels of transparency and customer service," said Wright. "We regret any confusion or frustration this situation may have caused our members."












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About the Blogger:


April Carson is the daughter of Billy Carson. She received her bachelor's degree in Social Sciences from Jacksonville University, where she was also on the Women's Basketball team. She now has a successful clothing company that specializes in organic baby clothes and other items. Take a look at their most popular fall fashions on bossbabymav.com


To read more of April's blogs, check out her website! She publishes new blogs on a daily basis, including the most helpful mommy advice and baby care tips! Follow on IG @bossbabymav


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