Problems at Intuit (INTU)
Intuit (NASDAQ: INTU — $109 billion) is a financial software company that targets individuals and small businesses with a suite of products including TurboTax, QuickBooks, Credit Karma, and Mailchimp. The Bear Cave believes Intuit owns a collection of second-tier assets that have systematically taken advantage of customers and gone to the edge of the law. Now, with goodwill across the Intuit ecosystem stretched thin, the company may suffer the consequences of years of predatory behavior.
For an example of Intuit’s aggressive practices let’s first look at Credit Karma, which Intuit acquired in December 2020 for $8.1 billion. Credit Karma offers its 100 million+ visitors free recommendations on loans and credit cards and makes a commission when consumers use its affiliate links. When closing the acquisition, Intuit said the combination “will make it simple for consumers to make better decisions with their money and take control of their financial lives.”
Not everyone agrees.
According to one February 2022 consumer complaint filed with the Texas Attorney General, obtained by The Bear Cave through a FOIA request, a distressed customer wrote,
“My elderly father has been involved in at least 4 online romance scams… I found out that my elderly father took out 2 personal loans through Credit Karma to give to said scammers. The first loan is with Upstart for $9,000, interest rate 28.88%, for 5 years. The second loan is with Personify for $4,000, interest rate of 81.5% for 3 years… I can’t understand how an 81.5% loan is legal. My elderly father is over 70 years old and his only income is social security.”
Personify is listed as number one on a Credit Karma blog post titled “best personal loans for bad credit in 2022.” Second on Credit Karma’s list of the best lenders for bad credit is Oportun Financial Corp (NASDAQ: OPRT — $151 million), which is good “if you’re looking to build credit from scratch.” Oportun Financial was investigated by the CFPB after it “sued thousands of low-income Latinos during the pandemic” and was recently fined for “a faulty algorithm that caused overdrafts and overdraft penalties for customers.”
Oportun Financial’s CEO, Raul Vazquez, also serves on Intuit’s board and audit committee. In addition, Intuit’s former CFO, R. Neil Williams, serves on the board of Oportun, which has fallen ~70% since its September 2019 IPO. Intuit classifies Mr. Vazquez as an “independent” board member.
Credit Karma’s website says it is devoted to “championing financial progress for all” and the company’s mission is “to empower each and every one of our members with the tools they need to turn their financial dreams into a reality.” Those claims are beginning to receive more scrutiny. In September, Credit Karma settled with the FTC for “tricking consumers with allegedly false ‘pre-approved’ credit offers.” The FTC announcement reads, in part,
“Credit Karma falsely told many consumers that they had been ‘pre-approved’ for credit offers, leading consumers to apply, incur a hard inquiry on their credit reports, and, if they are denied, potentially damage their credit scores unnecessarily.”
An FTC blog announcement for the settlement has over 1,000 comments, including one that reads,
“My mouth dropped when I read about this lawsuit. I always thought it was odd how my approval ratings were great but would still get denied. I would make excuses in my mind to make it make sense. I’m glad someone brought light to this situation because it affects people in more ways than people can imagine.”
As part of the September 2022 settlement, Credit Karma “will also have to stop deceiving consumers about credit offer approvals, which will be documented by an order requiring Credit Karma to preserve records of its marketing efforts.”
Credit Karma has also faced swift industry headwinds since Intuit’s acquisition. Its competitor NerdWallet (NASDAQ: NRDS) is down ~60% since its November 2021 IPO and on Tuesday Credit Karma announced a hiring freeze amid “revenue challenges.”
Intuit’s aggressive and allegedly illegal practices also extend to its crown jewel, TurboTax.