Class Action Claims Afterpay Conceals NSF, Overdraft Fee Risks, Targets ‘Young and Poor’ Users with Buy Now, Pay Later Service

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A proposed class action alleges thousands of “young and poor” consumers have been deceived into using Afterpay’s buy now, pay later service as a result of the company’s “misrepresentations and omissions” of how it actually works. 

The 13-page lawsuit, filed in California’s Northern District on May 27, claims Afterpay is not upfront with regard to the “real and repeated” risks of incurring multiple insufficient funds (NSF) or overdraft fees imposed by users’ banks as a result of automated transfers taken from their checking accounts. 

Although Afterpay has “explosively grown” in popularity in the United States in the years following its founding in Australia in 2016, the company, the complaint alleges, has concealed what the plaintiff calls the “hidden scourge” of its users, many of whom are struggling financially, being hit with “hundreds of thousands” of overdraft and NSF fees. 

According to the suit, Afterpay, which effectively offers users a loan as an alternative to other, traditional payment methods, sets its sights on specific groups of consumers in marketing its buy now, pay later services. 

“Afterpay specifically targets young and poor consumers and those struggling to make ends meet on a week-to-week basis,” the lawsuit alleges. “This group is its core constituency.” 

To those within its target audience, Afterpay purports to offer a solution to cash-strapped consumers, namely that it allows them to pay for purchases at a later date with “no interest, no fees and no hassle,” the lawsuit says. More specifically, the suit says Afterpay will break a consumer’s total into installments, and the individual’s debit card is charged automatically until the balance is paid in full.

The suit claims, however, that these representations are false, and that unsuspecting consumers, in truth, run up against “huge, undisclosed fees and interest” in the form of overdraft and NSF fees after using Afterpay. 

The case pins the allegedly significant overdraft and NSF fees incurred by Afterpay users on the company’s “deceptive and incomplete marketing materials,” which fail to disclose what the suit alleges to be the “devastating consequence” of using the defendant’s buy now, pay later service. Had Afterpay truthfully disclosed the specifics of its service, “[n]o reasonable consumer would run this risk,” the complaint contends. 

“This massive risk is known to Afterpay but is omitted from all of its marketing,” the case says. “Had Plaintiff and the Class members known of the true operation and risks of the Afterpay service, they would not have used the Afterpay service.” 

The lawsuit looks to represent all persons who used the Afterpay service and incurred an overdraft or NSF fee as a result of an Afterpay repayment deduction. 

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