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Klarna’s buy now pay later service specifically targets poor consumers struggling to make ends meet and overburdens them with undisclosed bank fees and interest, a new class action lawsuit alleges.
The nationwide class action lawsuit was filed in Connecticut on June 2 by lead Plaintiff Najah Edmundson, who alleges that Klarna falsely advertises itself as a service that allows users to pay for purchases at a later date, with no interest, no fees, and no hassle.
The company allows consumers at the checkout to divide a payment into four parts, where one is required at checkout and the remaining three are deducted by Klarna from the account holder over the following weeks. The company’s huge drawcard is its advertised lack of fees.
“These representations are false. In fact, there are huge, undisclosed fees and interest associated with using the service,” Edmundson says in the claim.
Edmundson made two purchases in February using Klarna unaware that Klarna’s service had a significant “catch” and that significant “interest” could result, the claim states.
On March 6, Klarna made a $15.83 deduction from Edmundson’s account as a partial repayment for one purchase. The deduction caused a $35 overdraft fee at her bank. Then the following day, Klarna made another deduction of $9.31 for the other purchase, which also caused a $35 overdraft fee.
According to the claim, Edmundson, like numerous other consumers, was deceived into using Klarna’s buy now, pay later service because of the company’s misrepresentations and omissions regarding the true operation and risks of the service.
“These risks include the real and repeated risk of multiple insufficient funds fees (‘NSF fees’) or overdraft fees imposed by users’ banks as a result of automated Klarna transfers from consumers’ checking accounts,” the claim states.
It adds that the “massive risk” is known to Klarna, but is omitted from all of its marketing. Instead, according to the Klarna website, the service is completely free, with no interest or hidden fees.
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 claim states, adding that Klarna CEO Sebastian Siemiatkowski recently told CNBC that: “We are, with this product, challenging a massive industry that has overcharged consumers with overdraft fees, with interest bearing terms of use.”
However, Edmundson says in the class action lawsuit that Klarna targets the same consumers as banks target with fees: those living paycheck to paycheck. “As a result, Klarna knew or should have known that such users were at extreme risk of overdraft fees when using the Klarna service.”
Edmundson wants to represent anyone who used Klarna and got an NSF or OD fee as a result. She is suing for fraud and violations of state advertising laws, and seeks damages, restitution, an injunction, and a jury trial.
Overdraft and insufficient fund fees are often the cause of class action lawsuits. This month, WesBanco was hit with a class action lawsuit that alleges the bank breaches its contracts with consumers by charging overdraft fees on accounts that are not overdrawn and charging numerous insufficient fund fees on the same item.
Have you ever used Klarna and been charged an overdraft or insufficient fund fee? Let us know in the comments section!
Edmundson is represented by Richard E. Hayber of Hayber McKenna & Dinsmore and Taras Kick of The Kick Law Firm, APC.
The Klarna Hidden Fees Class Action Lawsuit is Edmundson vs. Klarna, Inc., Case No. 3:21-cv-00758-KAD, in the U.S. District Court for the District of Connecticut.
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80 thoughts onKlarna’s ‘Free’ Buy Now Pay Later Service Burdens Cash-Strapped Consumers With Fees, Class Action Claims
Yes I used Klarna also and the same problems happened to me bank overdrafts I had to buy dog food, on a fixed income ya do what you have to sometimes. But these companies are just as bad as payday loan companies!
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