Afterpay, a buy-now, pay-later company, is facing a putative class action lawsuit in a California federal district court. The complaint alleges that Afterpay misled customers in representing that its services allowed customers to “pay for purchases at a later date, with no interest, no fees, and no hassle” when “there are huge, undisclosed fees and interest associated with using the service.” Afterpay’s service allows its customers to make a purchase on credit and repay the balance by making four payments over the course of six weeks.

The plaintiff claims that Afterpay did not disclose to its customers “that overdraft and NSF fees are a likely and devastating consequence of the use of its service.” She alleges that she “had no idea small, automatic Afterpay repayments could cause $35 bank fees from [her] bank” or that “Afterpay would process transactions when [her] accounts had insufficient funds.” While acknowledging that banks, not Afterpay, assess these fees, the plaintiff contends that “Afterpay misrepresents (and omits facts about) the true nature, benefits, and risks of its service … [including] that users are at extreme and undisclosed risk of expensive bank fees when using Afterpay.”

The complaint alleges that Afterpay’s failure to warn consumers about the potential risk of banks assessing overdraft and NSF fees is an unfair and fraudulent act and practice in violation of California’s Unfair Competition Law. The plaintiff seeks to represent a class of all Afterpay customers who incurred an overdraft or NSF fee because of a payment to Afterpay. The relief sought in the complaint includes injunctive relief, restitution of fees, disgorgement of allegedly ill-gotten gains, compensatory and punitive damages, interest, attorney fees, and litigation costs.