WASHINGTON, D.C. (WWLP) – The Federal Trade Commission (FTC) has settled with Credit Karma to reimburse people who responded to the company’s allegedly deceptive offers and then denied credit.

An FTC lawsuit alleges that Credit Karma deceived people by making claims that the consumer had been “pre-approved” or had “90% odds” of approval for credit cards or loans offered by banks and lenders that used Credit Karma to promote their financial products.

According to the FTC, consumers applied to Credit Karma and gave them personal information allowing for the collection of financial and other information. They then sent users recommendations in the form of deceptive “pre-approved” credit offers from at least February 2018 through April 2021, knowing that users were more likely to respond if they believed their applications would be accepted. But, the FTC says, for many of the supposed offers, nearly a third of the people who applied were rejected by the companies whose product Credit Karma recommended, based on disqualifying financial characteristics, like bankruptcies.

The FTC also said the companies’ reviews showed up as hard inquiries on the rejected applicants’ credit reports. A “hard inquiry” shows that the consumer applied for credit and the inquiry and rejection can lower a credit score.

In an agreement with the agency, Credit Karma will pay $3 million in restitution and is prohibited from making misleading claims that people have been or are likely to be approved for credit or loans.

Find out how to monitor and protect your credit by going to the FTC’s “Understanding your Credit” web page.