Klarna Seeks Arbitration In Lawsuit Alleging BNPL Loans Target Vulnerable Borrowers
By CU Today Staff —
CHICAGO—Klarna is seeking to force into arbitration a proposed class action alleging its buy now, pay later service targets financially vulnerable consumers while failing to screen out unaffordable lending, according to Law360.
The company argued the lead plaintiffs agreed multiple times to arbitrate disputes involving Klarna products and services, Law360 reported. The lawsuit accuses Klarna of using automatic withdrawals and repayment structures that can leave cash-strapped users exposed to overdraft and insufficient funds fees.
Bloomberg Law reported when the suit was filed in March that plaintiffs described Klarna’s practices as “predatory,” alleging the company’s BNPL model encourages repeat borrowing by consumers who may already be financially strained.
The case comes as BNPL providers continue to face scrutiny over whether short-term installment loans are pushing consumers to take on more debt than they can manage. The CFPB previously said BNPL lenders must provide credit card-like consumer protections, including dispute and refund rights, while noting concerns that the products can lead consumers to overextend themselves.
Originally reported by CU Today.