Klarna, Inc. allows consumers to make purchases on a “buy now, pay later” basis, at certain online and bricks-and-mortar stores. But the complaint for this class action alleges that the company makes representations and omissions that fail to warn consumers about the real risks of using Klarna’s services, which include nonsufficient funds (NSF) and overdraft fees when Klarna makes its deductions from customers’ checking accounts.
The class for this action is all persons who used the Klarna service and incurred an OD or NSF fee as a result of a Klarna repayment deduction.
The complaint alleges, “Klarna specifically targets consumers and those struggling to make ends meet on a week-to-week basis. This group is its core constituency.”
Klarna claims to allow consumers to pay for purchases in installments, with no interest and no fees. But the complaint alleges that this is not true, because consumers can incur “huge, undisclosed fees and interest” in the course of using the service.
The complaint describes Klarna’s workings this way: At a checkout point, online or in a store, the customer is offered a loan from Klarna as a way of paying for the transaction, along with short marketing messages about its purportedly free service. Customers who choose to use Klarna provide personal information such as their name, date of birth, and debit card information, and are then permitted to pay in installments.
For example, if the customer is making a $50 purchase, Klarna breaks the total into four installments of $12.50 each. The customer pays the first installment then and there, and the remaining three will be taken from the customer’s account via the debit card at two-week intervals.
Klarna advertises, “No interest. No catch.” But the complaint alleges that in fact many customers do end up getting charged interest and fees in their use of the service.
According to the complaint, five percent of bank accounts account for 63.3 percent of overdraft fees paid by consumers, and another 4.2 percent account for another 15 percent. The complaint alleges that these are the same people Klarna targets for its services: “As a result, Klarna knew or should have known that such users were at extreme risk of overdraft fees when using the Klarna service.”
The complaint compares an overdraft to a loan a bank makes to a customer, with the overdraft fee being the payment for the loan. Unfortunately, they are not cost effective, the complaint claims: “A 2008 Federal Deposit Insurance Corporation (FDIC) study showed that overdraft fees carry an effective APR in excess of 3,500 percent.”
Klarna makes the situation worse when accounts do not have the funds to pay its installments, the complaint alleges, by “reprocessing debits on the same or next day—when it knows users’ checking accounts are already negative.”
Article Type: LawsuitTopic: Consumer
Most Recent Case Event
Klarna “Free” Service Customers May Pay NSF or OD Fees Complaint
April 28, 2022
Klarna, Inc. allows consumers to make purchases on a “buy now, pay later” basis, at certain online and bricks-and-mortar stores. But the complaint for this class action alleges that the company makes representations and omissions that fail to warn consumers about the real risks of using Klarna’s services, which include nonsufficient funds (NSF) and overdraft fees when Klarna makes its deductions from customers’ checking accounts.
Klarna “Free” Service Customers May Pay NSF or OD Fees ComplaintCase Event History
Klarna “Free” Service Customers May Pay NSF or OD Fees Complaint
April 28, 2022
Klarna, Inc. allows consumers to make purchases on a “buy now, pay later” basis, at certain online and bricks-and-mortar stores. But the complaint for this class action alleges that the company makes representations and omissions that fail to warn consumers about the real risks of using Klarna’s services, which include nonsufficient funds (NSF) and overdraft fees when Klarna makes its deductions from customers’ checking accounts.
Klarna “Free” Service Customers May Pay NSF or OD Fees Complaint