March 28, 2023

Volume XIII, Number 87


March 27, 2023

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Retailers Must Be Careful With Private Label Credit Card Advertising

The FTC unanimously approved a consent order this week requiring Credit Karma, LLC to pay $3 million dollars for allegedly advertising to consumers that they were “pre-approved” for credit card offers, when in reality, the customers were not pre-approved, and in fact, were frequently rejected.

Credit Karma’s advertising—which purportedly took place over three years between February 2018 and April 2021—consisted largely of emails and webpages telling consumers they were “pre-approved” for various credit cards. The agency’s complaint cites internal A/B testing performed by Credit Karma showing that the pre-approval claim resulted in an increase in click rates when compared to the claim that consumers had “Excellent” odds of approval. According to the FTC, even when Credit Karma recognized that approval was not guaranteed, it represented that consumers had a 90% chance of approval, or used unclear and difficult-to-find disclaimers. The FTC’s enforcement action was pursuant to Section 5(a) of the FTC Act, which prohibits deceptive acts and practices; in the FTC’s view, Credit Karma’s “pre-approved” statements constituted false, misleading, and unsubstantiated claims.  

The credit cards themselves were not offered or issued by Credit Karma, but rather, by third-party financial services companies. So when customers actually clicked through the advertisements to apply, they frequently found themselves rejected. This calls to mind a popular arrangement for retailers: private label credit cards offered by third-party financial institutions.

This case serves as a useful reminder to retailers who offer these private label credit cards: like with any products, your credit card ads need to be truthful and substantiated. Even where a third-party financial services company may review eligibility and issue the card, retailers still must ensure that all associated marketing for the card complies with advertising laws and best practices.


Copyright © 2023, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XIII, Number 33

About this Author

Phyllis H. Marcus Partner Consumer Products Food Industry Retail Practices

With 17 years of experience at the FTC, Phyllis brings a unique advertising and children’s privacy vantage point to our clients.

Phyllis heads the firm’s advertising counseling practice, and focuses on all aspects of advertising, from the initial development of a claim to its ultimate defense in the marketplace. Phyllis’s practice includes claim creation and substantiation, pre-acquisition due diligence, dissemination in traditional and digital media, and both offensive and defensive competitor challenges. She also counsels clients on the intricacies of compliance with the Children’...

Samuel J. Thomas Litigation Attorney Hunton Andrews Kurth Law Firm Washington, DC

Sam’s wide-ranging practice focuses on class action and complex commercial litigation.

A litigation associate in the Washington, DC office, Sam represents clients in matters big and small from multi-district litigation to commercial lease disputes and non-party subpoenas. Sam also works closely on compliance issues, helping clients to safely navigate federal and state regulatory regimes. He maintains an active pro bono practice focused on asylum and relief from removal. Working with clients across a broad range of industries including food service, retail, and more, Sam has the...