Dutch Court rules Klarna’s late fees illegal, says charges violated credit laws
The District Court of Midden-Nederland has ruled that the late payment fees charged by Klarna are part of the company’s profit model and therefore subject to consumer credit regulations, according to NOS. Because Klarna did not meet the legal requirements for providing such credit, the court has invalidated the extra costs imposed on customers.
The ruling, issued Wednesday, comes in response to five lawsuits involving various “buy now, pay later” (BNPL) services. Two of the cases targeted Klarna, one of the largest players in the deferred payment market.
According to the court, Klarna extended consumer credit without properly informing customers. “This constitutes a loan, while Klarna failed to clearly indicate that,” the court stated. Dutch law requires companies offering credit to inform consumers with a warning that borrowing money costs money, and to assess the borrower's ability to repay the debt. Klarna did neither.
As a result, all extra charges Klarna billed to late-paying customers—including reminder fees, interest, and collection costs—are no longer valid. "This may mean that people who previously paid collection fees to Klarna could try to reclaim that money," André Moerman, a legal expert on debt issues, told NOS. “Even those who still owe such fees can now argue, based on this ruling, that they are not obliged to pay.”
Although delayed payment itself is not considered consumer credit under Dutch law, the European Court of Justice had previously ruled that if a service provider earns money through penalty fees, then the model qualifies as consumer credit. The Dutch court has now applied that logic directly to Klarna.
Moerman warned that consumers should remain cautious. “This is a ruling in a case between two parties. People shouldn’t count their money just yet,” he said. “Other cases are still pending, and not every court may interpret the law the same way.”
Klarna, responding to NOS, said the decision was “not based on information provided by the company.” The company defended its business model, stating, “Klarna benefits when payments are made on time, because then the money can be loaned out again, interest-free, to another customer.”
Klarna also said its prediction systems are becoming more effective. “In 2024, fewer than 3 percent of purchases resulted in a late fee, and that percentage continues to decline each year,” the company stated.
According to Klarna, the company earns most of its revenue from the services it provides to retailers. Shops pay subscription fees to offer Klarna as a checkout option.
Nonetheless, the ruling is being seen as a warning to other BNPL providers. “This is a good signal toward the industry,” Moerman said. “These services are mainly used by young people, and we are seeing that they often end up in financial trouble as a result.”
