DENVER — Back-to-school expenses add up fast, and many parents will likely use payment installment services to break down the total costs and make payments over time.
However, two popular services, Klarna and Afterpay, have faced lawsuits. The allegations levied against the companies come down to undisclosed fees associated with late or missing payments.
“Honestly, it is a great tool, as long as you plan it long term and it sticks with your budget,” said Keylen Villagrana with the Better Business Bureau.
Klarna is BBB accredited. Afterpay is not.
In the recent case Hale v. Klarna, the plaintiff indicates that a late fee is not the only challenge that consumers can face when making a late payment to Klarna. They also run the risk of getting an overdraft fee from their bank.
“That's also another thing to consider of those additional expenses that you might have to spend on are really, really sticking to that budget to make sure that you're not falling into that trap,” Villagrana said.
Klarna’s website does state that there are no fees unless the consumer fails to make a payment. It does say that there could be a late fee of $7 in some cases and that it could lead to overdraft fees.
There is always the chance, however, that consumers don’t see the warning. Many consumer loan companies have faced legal challenges in the past for burying the fine print on their websites.
Anyone with a complaint about a consumer loan company can file a report by calling the Consumer Financial Protection Bureau at 1-855-411-CFPB.