Klarna Sued Over 'Predatory' Buy Now, Pay Later Practices

Proposed class action alleges Klarna approves users without checking ability to pay, then takes automatic withdrawals.

Mar. 31, 2026 at 7:33pm

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A highly polished, metallic credit card-shaped object resting on a clean, monochromatic background, casting dramatic shadows and using dramatic studio lighting to symbolize the predatory lending practices of the 'buy now, pay later' industry.A conceptual studio photograph captures the cold, impersonal nature of 'buy now, pay later' lending practices that can trap vulnerable consumers.Chicago Today

A proposed class action lawsuit filed in Chicago federal court accuses Klarna Inc., the popular 'buy now, pay later' provider, of approving users for 'purchasing power' without investigating their ability to pay and instead making them agree to automatic bank withdrawals for some purchases. The complaint alleges Klarna 'replaced underwriting with the right to pull payments directly from consumers' accounts' and 'extended reusable credit without determining whether its consumers had any ability to repay'.

Why it matters

The lawsuit highlights growing concerns over the practices of 'buy now, pay later' companies, which have faced scrutiny for potentially targeting financially vulnerable consumers with easy credit and automatic payment withdrawals. As the 'buy now, pay later' industry continues to grow, there are questions about the lack of regulation and consumer protections in this space.

The details

According to the lawsuit, Klarna users are 'disproportionately financially vulnerable' and the company's practices of approving users without underwriting and then automatically withdrawing payments from their bank accounts can lead to overdraft fees and other financial hardship. The complaint alleges Klarna's model 'positioned itself to collect first by reaching directly into consumers' accounts when payments came due'.

  • The proposed class action lawsuit was filed on March 31, 2026 in Chicago federal court.

The players

Klarna Inc.

A popular 'buy now, pay later' provider that allows consumers to make purchases and pay for them over time.

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What’s next

The lawsuit seeks class certification and damages for Klarna users who were allegedly harmed by the company's practices.

The takeaway

This case highlights the growing scrutiny over 'buy now, pay later' companies and their lending practices, which critics say can trap financially vulnerable consumers in a cycle of debt. It raises questions about the need for more regulation and consumer protections in this rapidly growing industry.