Klarna “Buy Now, Pay Later” Plan and NSF Fees Class Action

Klarna, Inc. offers a “buy now, pay later” service to consumers who would like to spread out their payments for a purchase over time. The complaint for this class action alleges that the company makes misrepresentations and omissions in suggesting that the service is free, when in reality, users are all too likely to incur non-sufficient funds (NSF) fees or overdraft (OD) fees when their payment come due.

The class for this action is all persons who used the Klarna service and incurred an OD or NSF fee due to a repayment deduction from their bank account.

Klarna originated in Sweden in 2005 but has become one of the largest “buy now, pay later” services in the US. It allows consumers to pay for purchases in four installments.

Consumers are offered the service at a point of sale and, if they accept, enter their personal information, such as their debit card information. For example, if a consumer makes a purchase for $50, the amount is broken into four payments of $12.50. The first $12.50 is deducted from the consumer’s bank account at checkout; the other three are deducted at two-week intervals.

Klarna markets itself as a free service. The complaint alleges, “Klarna’s marketing and public communications stress that it is a service that allows users to avoid overdraft fees, interest and other predatory charges.” The complaint quotes the Klarna interface as saying, “Klarna is the smoothest & safest way to get what you want today, and pay over time. No catch. Just Klarna.”

The company also states, “No interest. No catch.” It promises, “When you split the cost of your purchase into 4 smaller payments with Klarna, you’ll never pay any interest. Ever.” However, the complaint alleges that there is a huge catch: NSF and OD fees when Klarna automatically withdraws its payments from the account of a customer who may already be cash-strapped.

“In its rush to tout itself as convenient, simple, automatic, and free,” the complaint alleges, “Klarna does not disclose that overdraft and NSF fees are a likely and devastating consequence of the use of its service. No reasonable consumer would run this risk.”

Even worse, if Klarna submits a request to payment that is rejected for lack of sufficient funds, the complaint claims, Klarna may reprocess the transaction on the same or the next day, “when it knows users’ checking accounts are already negative.” This means that users can incur multiple NSF fees or NSF fees plus OD fees before the transaction is paid.

Article Type: Lawsuit
Topic: Loans
Tags: Buy Now Pay Later Service, Insufficient or Non-Sufficient Funds Fees, Loan-Related Unfair Practices, Omitting or Withholding Information, Overdraft Fees, Unfair Services