The Federal Trade Commission is issuing payments to consumers misled by deceptive claims from Credit Karma.
The FTC is sending checks and PayPal payments to 50,994 consumers, adding up to more than $2.5 million, according to a Thursday (Oct. 31) press release.
The regulator took action against Credit Karma in 2022, fining the company $3 million over allegations that it had told consumers they were “pre-approved” and had “90% odds” of approval for credit to get them to apply for credit card offers, the release said.
In many cases, however, these consumers did not qualify for these credit offers, per the release. Credit Karma agreed to an FTC order to stop making these claims and compensate consumers.
Credit Karma said in September 2022 that it disputes the FTC’s claims but reached an agreement with the commission “to avoid disruption to our mission and maintain our focus on helping our members find the financial products that are right for them.”
The company contended the FTC’s allegations focused on the company’s past use of the term “pre-approved” for a small number of offers and did not challenge the approval language that Credit Karma began using in April 2021.
In other FTC news, the regulator announced this month its final rule that requires sellers to make it as easy for consumers to cancel their subscriptions, memberships and other recurring payment programs as it was to sign up for them.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” FTC Commission Chair Lina M. Khan said Oct. 16. “The FTC’s rule will end these tricks and traps, saving Americans time and money.”
The FTC’s new rule comes amid a time of widespread frustration with complicated processes around subscription cancellations, PYMNTS wrote Oct. 18.
However, a group of trade associations last week sued to block the so-called “click-to-cancel” rule, arguing that it exceeds the FTC’s authority and is not supported by evidence.
The three plaintiffs are the NCTA — The Internet & Television Association, representing cable and internet providers; the Electronic Security Association (ESA), representing the home security industry; and the Interactive Advertising Bureau (IAB), representing the online advertising industry.
The court filing argued the FTC’s rule is “arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act.”