The “buy now, pay later” (BNPL) short term financing model has enjoyed a resurgence in recent years. While the concept is not new, the integration of BNPL into technology platforms and e-commerce has kicked off a new wave of financed purchasing. Companies like Klarna, Affirm, and Afterpay exploded in value during the COVID-19 pandemic.
Purchasing on credit comes with risks, both for consumers and for lenders. Klarna’s increasing credit losses have made headlines. While the Consumer Financial Protection Bureau announced last year that it would mandate that BNPL platforms allow charge disputes and refunds, the new administration has announced it would not enforce that rule and is considering rolling it back.
In this context, docket analysis can show what kinds of court cases these companies are engaging in.
In federal court, Docket Alarm shows 171 cases since 2019 directed at Klarna, Affirm, or Afterpay. Court activity has increased steadily since 2020, alongside the popularization of the platforms.
The majority of the federal cases are classified as consumer credit, unsurprisingly. This analysis excludes state court cases, because nationwide data is not available for state courts, but it is likely that many state court cases are similar.
Of the three BNPL providers examined, Affirm has the most federal cases with 110 – Klarna only has 16. The major credit reporting agencies (Transunion, Experian, and Equifax also appear in these lawsuits.
Major law firms are also starting to become involved in these cases, exclusively for the defense. These include Pepper Hamilton (now Troutman Pepper Locke), Morgan Lewis, and Jones Day.
