Klarna, the Swedish buy-now-pay-later company that listed on the New York Stock Exchange in September 2025, is defending a securities class action brought by IPO investors who say the company hid the risk of a coming spike in credit losses. It is the highest-profile Klarna lawsuit, but not the only one: separate consumer cases challenge how Klarna’s autopay causes overdraft fees, how its browser extension diverts affiliate commissions from content creators, and whether its lending practices comply with federal credit laws.
The IPO Securities Class Action
Klarna priced its IPO at $40 per share on September 9, 2025, and began trading on the NYSE the next day under the ticker KLAR. It was the largest U.S. tech IPO of the year, underwritten by a syndicate of 15 banks led by Goldman Sachs, J.P. Morgan, and Morgan Stanley.1Bloomberg Law. Klarna Lowballed Loan Models Risk Before IPO, Suit Says
Two months later, on November 18, 2025, Klarna reported its first post-IPO earnings. Provisions for credit losses had jumped to $235 million in the third quarter, up from $116 million a year earlier, an increase of roughly 102%. The company swung to a $95 million net loss for the quarter after posting a $12 million profit in the same period of 2024.2Klarna Group plc. Q3 2025 Earnings Release The stock fell into the low $30s, roughly 22% below the IPO price.3GlobeNewsWire. KLAR Alert: Klarna Group Facing Securities Class Action
On December 22, 2025, investor Dilip Nayak filed a class action in the U.S. District Court for the Eastern District of New York, case number 1:25-cv-07033, on behalf of everyone who bought Klarna securities traceable to the IPO registration statement and prospectus.4CourtListener. Nayak v. Klarna Group plc5PR Newswire. Klarna Group Hit With IPO-Related Securities Class Action
What the Complaint Alleges
The suit is brought under Section 11 of the Securities Act, which holds issuers liable for material misstatements or omissions in IPO registration documents. Investors argue that Klarna’s prospectus materially understated the risk that loan-loss reserves would balloon within months of the listing.6Berger Montague. Klarna Securities Fraud Investigation According to the complaint, Klarna knew or should have known this risk because many of its borrowers were financially unsophisticated or in hardship and were willing to pay high interest to finance low-value purchases such as fast-food deliveries.7Banking Dive. Klarna Faces Investor Lawsuit Over IPO The prospectus acknowledged loan losses in general terms, plaintiffs say, but omitted these specific warning signs about the customer base, rendering Klarna’s credit-modeling claims misleading.3GlobeNewsWire. KLAR Alert: Klarna Group Facing Securities Class Action
Who Is Named
Beyond the company, the complaint names nine officers and directors who signed the registration statement, including CEO and co-founder Sebastian Siemiatkowski, CFO Niclas Neglén, and board chair Michael J. Moritz.4CourtListener. Nayak v. Klarna Group plc8Yahoo Finance. Klarna Faces Investor Lawsuit All 15 underwriter banks are also defendants, among them Goldman Sachs, J.P. Morgan, Morgan Stanley, Bank of America, Citigroup, Deutsche Bank, and UBS.
Where the Case Stands
The lead plaintiff deadline passed on February 20, 2026. As of mid-2026 the case is active, with counsel appointed in April 2026 and a court order entered in May 2026. No class has been certified.4CourtListener. Nayak v. Klarna Group plc Several firms beyond Nayak’s counsel have sought to represent investors, including Kaplan Fox & Kilsheimer, Robbins Geller Rudman & Dowd, and Hagens Berman. A Klarna spokesperson said the company believes the allegations lack merit.7Banking Dive. Klarna Faces Investor Lawsuit Over IPO
How Klarna Explains the Numbers
Klarna says the loss-provision spike is an accounting artifact, not a sign of worsening loan quality. In its Q3 2025 earnings release, the company said provisions on its “Fair Financing” product, a six- to twelve-month loan, must be recognized upfront under accounting rules even though revenue comes in over the life of the loan.2Klarna Group plc. Q3 2025 Earnings Release The company also pointed to falling delinquencies: its global BNPL delinquency rate dropped from 1.03% in Q2 2024 to 0.88% in Q2 2025. Siemiatkowski called the improvement “proof that our model is working exactly as intended.”9Klarna Investor Relations. Klarna Delinquency Rates Drop as Consumer Health Improves
Klarna’s 2025 annual report shows a full-year net loss of $273 million after a $21 million profit in 2024. Its unsecured consumer credit exposure was $15.2 billion, funded largely by $13 billion in consumer deposits, and funding costs nearly doubled from $297 million in 2023 to $667 million in 2025.10Stock Titan. Klarna Group plc Annual Report (20-F) The distance between those figures and Klarna’s public messaging about improving default rates is the gap the securities suit asks a court to weigh.
Consumer Lawsuits
Overdraft Fees From “Pay in 4” Autopay
In June 2021, Connecticut resident Najah Edmundson filed a class action in the U.S. District Court for the District of Connecticut alleging that Klarna’s marketing of “Pay in 4” as interest-free and fee-free was deceptive. Edmundson said Klarna’s automatic payment deductions drained her checking account and triggered $70 in bank overdraft fees, a risk she says the company knew about but did not disclose.11Top Class Actions. Klarna Buy Now Pay Later Service Burdens Consumers With Fees, Class Action Says12FindLaw. Edmundson v. Klarna Inc.
The case never reached the merits in court. Klarna moved to force it into arbitration, and although the trial court denied that motion, the Second Circuit reversed in November 2023. The appellate court held that Klarna’s checkout widget gave adequate notice of its terms: a hyperlink in bold, underlined text sat directly above a “Confirm and continue” button paired with “I agree to the payment terms,” and a reasonable user could not have missed it. The case was sent to arbitration.12FindLaw. Edmundson v. Klarna Inc.
Hijacked Affiliate Commissions
In February 2025, a California-based content creator filed a class action against Klarna in the Central District of California, case number 2:25-cv-00124, over Klarna’s browser extension. The complaint alleges that the extension secretly replaces affiliate marketing tracking tags with Klarna’s own during online checkouts, so referral commissions that would otherwise go to the influencer who sent the customer end up with Klarna. Plaintiffs say this happens even when a shopper reached the retailer through an influencer link and even when the extension finds no coupon or savings to offer. The suit invokes California’s Unfair Competition Law and the state’s computer fraud statute, and seeks to represent U.S. creators who lost commissions to the extension.13ClassAction.org. Klarna Lawsuit Claims Browser Extension Steals Content Creators Commission Payments
Autopay and Underwriting Under TILA and EFTA
A separate consumer class action alleges that Klarna’s BNPL model lacks adequate underwriting and that its mandatory autopay requirement violates the federal Truth in Lending Act and the Electronic Fund Transfer Act, which bar conditioning credit on enrollment in automatic payments. That complaint describes Klarna’s borrower base as disproportionately financially vulnerable, with subprime credit scores or no credit history.14Bad Credit. Klarna Class Action Suit Could Reshape BNPL Compliance Rules
Regulatory Inquiries
Klarna is also under government scrutiny, though these inquiries are separate from the lawsuits and have not produced enforcement actions. In December 2021 the Consumer Financial Protection Bureau ordered Klarna and four other major BNPL providers to turn over information on their business practices, citing concerns about consumer debt accumulation, regulatory arbitrage, and data harvesting.15Consumer Financial Protection Bureau. CFPB Opens Inquiry Into Buy Now, Pay Later Credit The CFPB moved in 2024 to apply Regulation Z disclosure rules to BNPL products, but in May 2025 said it would deprioritize enforcement of that rule and was considering rescinding it.16Consumer Financial Protection Bureau. CFPB Announcement Regarding Enforcement Actions Related to Buy Now, Pay Later Loans
At the state level, North Carolina Attorney General Jeff Jackson leads a coalition of seven states, including California, Illinois, and Connecticut, investigating Klarna and other BNPL lenders. The coalition has asked for information about how the companies assess a consumer’s ability to repay, their billing practices, and how they handle disputed charges.17North Carolina Department of Justice. Attorney General Jeff Jackson Leads Inquiry Into PayPal, Klarna, and Other Buy Now, Pay Later Lenders No enforcement action has come out of either the federal or state inquiries as of mid-2026.