For a species so intelligent, human beings have a pretty strong tendency to make mistakes. The same has already been proven quite a few times throughout our history, with each testimony practically forcing us to look for a defensive cover. To the world’s credit, we will find the best possible answer for our conundrum once we bring dedicated regulatory bodies into the fold. You see, having a well-defined authority across each and every area was a game-changer, as it instantly gave us a cushion against our many shortcomings. However, the utopia that emerged from it was pretty short-lived, and if we are being honest, it was all technology’s fault. Technology deserves the blame here, because the moment its layered nature took over the scene, it allowed people an unprecedented chance to exploit others for their own benefit. In case the innate dynamic wasn’t devastating enough, the whole runner started to materialize on such a massive scale that it expectantly overwhelmed our governing forces and sent them back to the drawing board. After spending a long time in the wilderness, though, the regulatory contingent finally looks ready to make a comeback. This has only turned more and more evident over the recent past, and we can very well expect it become even stronger on the back of a new FTC move.
Federal Trade Commission has formally ordered personal finance company Credit Karma to pay a $3 million penalty for misleading customers about their eligibility in regards to receiving a credit card. According to certain reports, the company, between February 2018 and April 2021, violated Section 5 of the FTC Act by telling people that they’d been pre-approved for credit when, in reality, they were never qualified. These inaccurate claims on Credit Karma’s part got many people to apply; something that eventually prompted hard inquiry on their credit reports, and as a result, further damaged the applicants’ credit score.
“Credit Karma knew that its purported ‘pre-approvals’ conveyed false ‘certainty’ to consumers, based on the results of experiments, also known as A/B testing, showing that consumers were more likely to click on offers saying ‘preapproved’ than those saying they had ‘excellent’ odds of being approved,” the FTC said
Beyond the financial penalty, though, Credit Karma is also ordered to preserve records of any market, behavioral, or psychological research, or user, customer, or usability testing, including any A/B or multivariate testing, copy testing, surveys, focus groups, interviews, clickstream analysis, eye or mouse tracking studies, heat maps, or session replays or recordings, it might conduct within the public setting.
Going back to the fine for a second, the money raised from there will be redirected to all the applicants who were a victim of this whole campaign. Credit Karma, however, is not the first company that has faced FTC’s brunt for misleading people. Last month, the agency issued a payout worth more than $9.7 million, which was collected in relation to a case where LendingClub deceived its customers by claiming it wasn’t taking any cuts from their loan. As we would find out, the company will go on to deduct hundreds or even thousands of dollars in hidden upfront fees