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Credit Karma Tricked Customers Into Thinking They Were Pre-Approved for Credit Cards, FTC Says (cbsnews.com) 41

Posted by msmash from the time-to-face-the-music dept.
The Federal Trade Commission has ordered personal finance company Credit Karma to pay $3 million to customers the agency alleges were deceived into applying for products they weren't eligible for. From a report: Credit Karma used "dark patterns" to trick consumers into thinking they were "pre-approved" for credit card offers that they usually did not qualify for, the FTC said in a news release announcing the settlement. "Dark patterns" refer to website and app interface designs that can be used to manipulate or mislead consumers. "For many of these offers, almost a third of consumers who received and applied for 'pre-approved' offers were subsequently denied based on the financial product companies' underwriting review," the agency said in a previously issued consent decree.

Credit Karma, which provides users with tools to monitor their credit scores and reports, told some users that they had "90% odds" of being approved for credit products, according to the FTC. Such practices wasted consumers' time and could have damaged their credit scores, the agency said. Credit Karma disputed the FTC's claims in a strongly worded statement to CBS MoneyWatch.
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Credit Karma Tricked Customers Into Thinking They Were Pre-Approved for Credit Cards, FTC Says More

Credit Karma Tricked Customers Into Thinking They Were Pre-Approved for Credit Cards, FTC Says

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  • Old Trick (Score:4, Insightful)

    by Petersko ( 564140 ) on Wednesday January 25, 2023 @01:07PM (#63239802)

    If a title combines a domain word with a feel good modifier, and you chose to conclude that you can't trust the entity involved, you would be right far more than wrong.

    "Credit Karma"
    "Patriot Act"
    "Truth Social" ... in fact, "Truth" anything...

    • If you're pre-approved for a credit card or other financial service, this means they've already done their legally required due diligence so then there's no need to give them any further information or make an application; you just accept the offer or decline. The scumbags of the world will get away with whatever we let them. Who's stopping them from doing this?
      • BTW, in other parts of the world, if a financial advisor's client has assets/products with an American bank, their advice is almost invariably to get their money out ASAP. Apparently, unless you can afford some hefty legal action, it's close to impossible to recover funds for the beneficiaries of in the event of illness, death, etc., from American banks. It's still very much the wild west over there.
        • From inside the country the system works. Perhaps too many crooked people from outside the country keep claiming money that isn't theirs so everyone gets tied up in the requirements needed to prove you aren't one of them. Add a named beneficiary to the account, it should reduce a ton of paperwork.

        • Really? Admittedly I'm from Canada. When I signed over asset management authority to a wealth management company, I filled out beneficiary forms for each account. I also have a proper will and testament in place. Are the systems that dissimilar?

      • It means no such thing. It means that you have not yet been approved, but might be.

      • I agree with this, now there are a lot of scams appearing on the internet, for me this wouldn't be a problem, and for my father it is, because he often enters sources like https://gamblizard.ca/no-deposit-bonuses/ [gamblizard.ca] where it says no deposit bonuses or other information that would attract him and he accesses and starts losing money because this type of game will obviously drain you of money because that's their system.

    • Let's get things moving to amend "truth" in the same way that they have amended "literally".

      Literally (Merriam-Webster): virtual -> —used in an exaggerated way to emphasize a statement or description that is not literally true or possible

      Proposed:

      True: virtual -> used in an exaggerated way to emphasize a statement or description that is not literally true or possible

    • Re: (Score:2)

      by eepok ( 545733 )

      That would be the "USA PATRIOT Act". It's an acronym: Uniting and Strengthening America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism.

      • That would be the "USA PATRIOT Act". It's an acronym: Uniting and Strengthening America by Providing the Appropriate Tools Required to Intercept and Obstruct Terrorism.

        As with many (most?) Acts out of Congress, it's a backronym [wikipedia.org]:

        Many United States Congress bills have backronyms as their names; examples include the American CARES Act (Coronavirus Aid, Relief, and Economic Security Act) of 2020, the USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act) of 2001, and the DREAM Act (Development, Relief, and Education for Alien Minors Act). In the 113th Congress (2013) there were over 240 bills with such names.

        /just-being-picky

        • Re: (Score:2)

          by eepok ( 545733 )

          Further clarification: Even if someone in the legislative process first thought "It should be named the USA Patriot Act" and someone then said, "We should make it an acronym", the law was still passed as "UNITING AND STRENGTHENING AMERICA BY PROVIDING APPROPRIATE TOOLS REQUIRED TO INTERCEPT AND OBSTRUCT TERRORISM (USA PATRIOT ACT) ACT OF 2001"

          https://www.govinfo.gov/conten... [govinfo.gov]

          I don't think anyone's under the impression that the full name was proposed and someone noticed, "Hey, wait a second! This spells USA

    • "Preapproved" is one of those words. It literally means, "Your loan has not yet been approved," nothing more and nothing less, but they'll never tell you that until it's time to say "No."

      This is universally true in the credit business, not just a practice of this particular company.

    • Re: (Score:2)

      by mjwx ( 966435 )

      If a title combines a domain word with a feel good modifier, and you chose to conclude that you can't trust the entity involved, you would be right far more than wrong.

      "Credit Karma"
      "Patriot Act"
      "Truth Social" ... in fact, "Truth" anything...

      That's the point... they want to dissuade those who are not easily fooled.

      It's similar to spam, spammers could write perfectly correct grammar and sentences but the atrocious spelling and grammar is meant to put off people who wouldn't fall for the scam.

  • Surprisingly vigorous enforcement (Score:4, Informative)

    by timeOday ( 582209 ) on Wednesday January 25, 2023 @01:07PM (#63239804)
    So they told people they had a 90% chance when it was actually 66%. I'm honestly surprised they're being held to account for that level of inaccuracy. I always thought the "you're approved!" junkmail had no basis in anything.
    • Junk mail doesn't issue daily reminders and push notifications. Also junk mail doesn't already have your credit history. However, if you put "guaranteed approval" on something, you have to approve a level of credit that falls within the legal framework such as $250 credit card limit, with $250 security deposit and 29% interest is "approved" and zero risk.
      • They don't say guaranteed. They say you have outstanding approval odds. I think this is just yet another example of people who can't read complaining they had one pulled over on them and our legal system obliges.

        • Re: (Score:1)

          by Anonymous Coward

          Oh sure, blame the victim! It's not their fault they barely can read and/or understand, it's the damned system!
          Idiocracy, anyone?

  • I've used creditkarma for years just to keep tabs on my credit score. Those ads are always prominently displayed and I've just learned to tune them out. To me, they were only a nuisance since I didn't need another credit card, but I could see someone who is there with damaged credit might be led to believe that creditkarma was somehow finding them card issuers that were willing to roll the dice on their particular credit worthiness.

    Hopefully, this means they'll stop doing it.

    • I'm curious why they did it in the first place, since it sounds like a waste of everybody's time. Was there a bait and switch where you'd be declined for the good card and offered a crummy one instead?

      • Re: (Score:2)

        by suutar ( 1860506 )

        My best guess is they get a fee for each application, though whether they get paid by the banks who are looking for customers or by the credit agencies who get queried during the application (or maybe both).

    • I've used creditkarma for years just to keep tabs on my credit score.

      Both my bank and my credit card issuers allow me to do this for free. Not sure why you need a third party service for this?

  • ...after a fickle bitch, you deserve what you get.

  • Credit Karma is shady AF anyway.

    From day 1, they constantly ran ads and promoted themselves as a useful tool/app to toss on your phone so you can easily check your credit score. In reality, that's just the bait to get you to use their system, which inundates you with offers to change your various insurance plans, do loan re-fis, sign up for new credit cards, etc.

    And ALL of it is presented as though these are offers carefully selected for you because they know enough about your credit history to know you can

    • Re: (Score:1)

      by Anonymous Coward

      Not quite true.

      They are shady AF yes, but not since day 1. It was only about 10 years ago they went full dot-com-shade.

      Initially they were a really good service.
      They had ads, but so does everything, and no they did not initially present those ads as offers selected for you or that they were a good idea.

      Initially they didn't promote themselves on their own site because there was no need. They flat out just claimed to pull all of your credit scores so you don't have to deal with the reporting agencies direc

  • All credit cards are shady as fuck though. Best to keep your limit as low as possible, it's an evil trap even smart and wealthy people fall into.

    • All credit cards are shady as fuck though. Best to keep your limit as low as possible, it's an evil trap even smart and wealthy people fall into.

      Pay it off every month, and it's all good.

      Hell, I profit off my Credit card.

  • ...in my experience, is almost always complete marketing bullshit. Those go straight to the recycle bin.

  • People who didn't get approved for a card probably had bad credit and the last thing they needed was another credit lookup in their record. I feel like for the damage that caused to poor people, the fine should be a lot harsher. $3 million is pathetic when distributed across so many people. When you inconvenience the wealthy, you incur a lot more wrath.

  • Wow (Score:2)

    by Bahbus ( 1180627 )

    Surprising. It's almost as if any company that advertises any kind of service related to credit scores is predatory as fuck by default - because the entire credit system is predatory by default. It's all made up bullshit designed to fuck over the people who are already fucked. It's a garbage, worthless system that has no benefits to society. And anything that you think is a benefit to the credit system, is more half-assed, made-up, bullshit.

    If anyone reading this works in the credit industry: I hope you die

    • Re: (Score:2)

      by Bahbus ( 1180627 )

      AND
      To those of you that have used, or currently use, any service like Credit Karma...
      And those that obsessively check your credit score...

      You are an idiot, and they got you.
      Stop giving such a fuck about it, and instead tell them to fuck off, so we can destroy this dumbass system.

  • Were they being paid per application? That doesn't sound like a good deal for the card companies - wouldn't they want to pay for successful applications?

    But then I still don't see why someone checking your credit rating should hurt it.

  • When I was fresh out of high school, I kept getting inviting letters that I was pre-approved for credit cards. When I needed a card, I called before the "offer expires" and I was denied, or approved with a line that was significantly lower than what the letter said. This kept happening to me for a long time until I was able to build my own credit to a point where I get to name how much I want in my credit line.

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