Dutch foundation launches class action lawsuit against buy-now-pay-later service Klarna

The Mass Damage & Consumer Foundation (SMC) has launched a class action lawsuit against the payment service Klarna. According to the foundation, the company violates consumer credit regulations with its pay-later services.

Klarna’s buy-now-pay-later services are “essentially just a loan,” which should be subject to strict regulation, said SMC chairwoman Lucia Melcherts. The company is not adhering to these strict rules, the foundation said. As a result, consumers face unjustified claims, additional costs, and mounting debts, the foundation said.

“With Klarna, people can face unintended additional costs and may even end up in financial trouble,” Melcherts said.

According to the claims foundation, Klarana does not conduct an adequate creditworthiness assessment, fails to properly inform consumers about the risks, and handles disputed claims, returns, and cases of fraud carelessly. It is also too easy for minors to use the service, SMC said.

SMC demands that Klarna reimburse the “unjustified” costs to consumers, including purchase amounts, reminder fees, fines, and collection costs. The foundation estimates that the total amount of the repayment will exceed €500 million.

Earlier this year, it became clear that Klarna was violating Dutch law by collecting customers’ debts without being registered in the debt collection register. And in May last year, a Dutch court declared Klarna’s late fees illegal.

Financial complaints institute Kifid also looked into Klarna in April and found that Klarna had seriously violated consumer credit regulations. In two investigated online purchases, the payment service allegedly failed to perform the mandatory creditworthiness assessment.

The Dutch Authority for the Financial Markets (AFM) said last year that consumers need extra protection against the rising popularity of buy now, pay later services.

Klarna has been asked for a response.