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Credit Karma to pay $3M for misleading consumers, feds say

Credit Karma has been ordered to pay $3 million to prospective customers for misleading them over "pre-approved" credit cards, according to the Federal Trade Commission which announced its final consent order Monday. Photo courtesy of Credit Karma
Credit Karma has been ordered to pay $3 million to prospective customers for misleading them over "pre-approved" credit cards, according to the Federal Trade Commission which announced its final consent order Monday. Photo courtesy of Credit Karma

Jan. 23 (UPI) -- The Federal Trade Commission has finalized its order, forcing Credit Karma to pay prospective customers $3 million for tricking them into applying for "pre-approved" credit card offers.

The FTC's consent order, released Monday, comes after a public comment period and a unanimous commission vote of 4-0. The order requires Credit Karma to pay consumers $3 million for "wasting their time" applying for credit cards. It also requires the company to stop making deceptive claims.

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The FTC's complaint, which was first announced in September, said the credit card company used "claims that consumers were 'pre-approved' and had '90% odds' to entice them to apply for offers, that in many instances, they ultimately did not qualify for," the commission said.

The commission also accused Credit Karma of forcing consumers to provide personal information, including date of birth and last four digits of their Social Security number, to access certain tools on the company's website.

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Close to a third of those who applied for "pre-approved" credit cards were later denied and suffered a negative impact to their consumer credit scores, according to the FTC.

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"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 last year.

"The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce," Levine added.

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Karma Credit denied the FTC's claims again Monday, after blasting the commission when the complaint was filed.

"We fundamentally disagree with the FTC's allegations about marketing terms that aren't even in use anymore," Credit Karma chief legal officer Susannah Wright said in a statement in September.

"Ultimately, we reached this agreement to avoid disruption to our mission and maintain our focus on helping our members find the financial products that are right for them."

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