The Federal Trade Commission (FTC) recently began distributing over $2.5 million to more than 51,000 Credit Karma customers as part of a settlement addressing misleading credit card pre-approval claims.
This case underscores the importance of transparency in financial services and provides restitution to those who were adversely affected.
The Background of the Settlement
From February 2018 to April 2021, Credit Karma promoted credit card offers to customers with claims of “pre-approval” or “90% odds” of approval. The FTC’s investigation revealed that these claims were often misleading:
- One-third of applicants were denied despite assurances.
- Customers wasted time and faced negative effects on their credit scores due to unnecessary hard inquiries.
The FTC accused Credit Karma of intentionally obscuring disclaimers in fine print and continuing these practices despite knowing their impact. Training materials reportedly acknowledged frequent customer complaints about being denied for pre-approved offers.
Settlement Details
As part of the settlement, Credit Karma agreed to:
- Pay $3 million in restitution, with $2.5 million distributed to eligible customers.
- Stop making misleading claims about pre-approvals or approval odds.
- Maintain records to prevent deceptive practices in the future.
Who Is Receiving Refunds?
More than 50,994 customers affected by the false pre-approval claims will receive payments. Refunds are being distributed via:
- Mailed Checks: Sent to eligible recipients’ addresses.
- PayPal Payments: Digital transfers to customers who opted for this method.
Key Dates and Deadlines
Customers who submitted valid claims for reimbursement before March 4, 2024, are part of this payout. The FTC has also advised recipients to:
- Deposit checks within 90 days of receipt.
- Accept PayPal payments within 30 days to avoid delays or issues.
How to Check Eligibility
If you believe you may qualify for a payout:
- FTC Notifications: Check for correspondence from the FTC regarding your eligibility.
- Claim Information: If applicable, file claims through the official settlement website before the deadline.
- Contact Information: Ensure your address and PayPal details are updated to avoid missing payments.
If no claims process was required, eligible individuals are automatically included based on customer data provided by Credit Karma.
What If You Missed the Deadline?
If there are leftover funds after the initial distribution, the FTC may initiate a second round of payments. These are typically sent automatically to recipients who deposited their first payment.
Credit Karma’s Response
In its defense, Credit Karma has maintained that:
- It ceased making the disputed statements years ago.
- It does not make lending decisions, as it is not a lender.
- Its users have a higher credit card approval rate than the national average.
The company expressed its commitment to providing helpful financial tools and emphasized that settling the matter allows them to focus on serving their members.
Lessons for Consumers
This case highlights the importance of verifying financial offers and being cautious of marketing claims. Consumers should:
- Read the Fine Print: Carefully review terms and disclaimers.
- Monitor Credit Scores: Check for unnecessary inquiries and take steps to dispute errors.
- Stay Informed: Follow updates from the FTC to understand your rights.
By holding companies accountable for misleading practices, settlements like this aim to protect consumers and promote trust in financial services.
