SAN JOSE, Calif.–PayPal is being targeted by a class action suit over its buy now, pay later (BNPL) offering.
The plaintiff in the case is alleging PayPal targeted “poor” consumers with a deceptive offer to buy now, pay later that resulted in “huge, undisclosed fees,” a new class action lawsuit alleges.
In a $5 million class action complaint filed March 1 in a California federal court, Plaintiff Felipe Vidaurre said the payment technology company misrepresented the possibility of insufficient fund fees or overdraft charges in its “Pay in 4” offer, according to ClassAction.com.
As CUToday.info has reported, BNPL offers have exploded in popularity, with fintechs leading the way. Credit unions also have related initiatives under way.
Vidaurre alleges he and thousands of other similarly situated PayPal customers had been deceived about the true operation and risks of the service, ClassAction.com stated.
“These risks include the real and repeated risk of multiple insufficient funds fees or overdraft fees imposed by users’ banks as a result of automated PayPal transfers from consumers’ checking accounts,” he stated.
According to the suit, Vidaurre said he faced three separate insufficient funds fees, totaling nearly $90, on a single repayment for a relatively small purchase. In his case, PayPal reprocessed payments that weren’t initially successful, triggering repeated fees, the complaint states.
“PayPal’s ‘Pay in 4’ service specifically targets poor consumers and those struggling to make ends meet on a week-to-week basis,” Vidaurre alleged, according to ClassAction.org.
‘Significant Overdrafts’
As it doesn’t properly disclose its fees, it causes unsuspecting consumers like him to incur significant overdraft and non-sufficient fund fees on their linked bank accounts, he said.
“Unfortunately, PayPal’s operation, along with its deceptive and incomplete marketing materials, means that users like Plaintiff end up paying huge amounts of fees and interest, which PayPal falsely assures users they will not receive,” according to the class action lawsuit.
He’s suing under consumer laws and seeking damages, restitution, an injunction, fees, costs and a jury trial, the report states.
In addition to PayPal, Afterpay, Klarna, and Affirm are three buy now, pay later companies that have already faced class action lawsuits in recent years, ClassAction.org stated.