"Pre-approved" sounds great, but it may not mean what you think.
The Federal Trade Commission is taking action against Credit Karma, claiming it tricked consumers into applying for cards with allegedly false 'pre-approved' offers.
"When people see the term pre-approved, they assume that they're going to get that card. Well, that's not always the case," said Linda Sherry, Director of National Priorities for the non-profit Consumer Action.
Sherry says, only the company issuing a card has final say if an applicant qualifies, not third parties like Credit Karma. According to theFTC complaint, Credit Karma violated the Federal Trade Commission Act by falsely representing that consumers were pre-approved for credit offers between February 2018 and April 2021.
The FTC alleges this wasted consumers' time and damaged their credit with unnecessary hard pulls.
"There's all these platforms that will show you all the different credit cards, etc. and if you click and you actually get approved, that platform [or] that company makes money.
There's a lot of skin in the game to make money off of people applying for these credit cards," Sherry said.
Credit Karma accepted a $3 million fine which will go to impacted consumers. But the company released a statement writing in part, 'they fundamentally disagree with the FTC allegations', adding those pre-approval 'marketing terms aren't even in use anymore'. Here's Credit Karma's full statement.
When it comes to prescreened offers, you do have a say. If you're getting bombarded with emails, texts, and offers saying you've been pre-screened and qualify for an offer you can opt out. Find the details to opt out, here.
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