Affirm Holdings Facing Class Action Over Alleged Misrepresentations of ‘Buy Now, Pay Later’ Service

New to ClassAction.org? Read our Newswire Disclaimer

Affirm Holdings faces a proposed class action that alleges it has materially misrepresented its “buy now, pay later” reverse layaway service. 

The six-page suit argues that the plaintiff and proposed class members desired to use a product that was “different, and less financially burdensome, than a traditional credit card” yet ended up saddled with increased debt, high interest payments and reduced consumer protections after using Affirm’s service. 

Although San Francisco-based Affrim touts itself as an alternative to “traditional” lenders such as credit cards, payday loans and banks, the interest rates faced by users “exceed most credit cards, without any of the protections of this regulated form of payment,” the lawsuit claims. Per the suit, most Affirm users finance an average purchase of $400 for nine months, meaning they’ll pay interest during the entire term of the loan at an unfavorable annual percentage rate (APR). 

“Defendant misrepresented the Product through statements, omissions, ambiguities, half-truths and/or actions,” the complaint claims, alleging Affirm “took advantage of consumers’ cognitive shortcuts” at the point-of-sale in order to gain their trust. 

According to the lawsuit, Affirm offers consumers short-term loans through partnerships with online or brick-and-mortar retailers. The service essentially allows consumers to buy something and then make multiple payments until it’s paid off, the case says, and the ease with which Affirm’s product can be accessed “encourages spending on items that otherwise could not be afforded,” the suit contends. 

Per the case, a “recent survey” has revealed that shoppers who utilize buy now, pay later services increased their spending between 10 and 40 percent in comparison to using a credit card. The complaint asserts that installment payments are harder to track, and consumers, as a result, face an increased chance of failing to make payments on time. 

Another drawback of Affirm’s service, according to the lawsuit, is that buy now, pay later providers are unable to provide refunds for products that are defective, leading a customer to have to deal with a merchant who “has little incentive to refund money already received.” 

“This is a stark distinction from credit cards, which permit consumers to dispute purchases,” the suit points out. 

The lawsuit alleges Affirm is “mainly targeting millennials and is hoping to fill the void left by this age group’s mistrust of credit cards.” The plaintiff, a Rockland County, New York resident, claims she was harmed as a result of incurring excessive fees and the defendant’s alleged failure to “protect her interests” in any disputes or possible disputes with participating merchants. 

“Plaintiff and class members would not have used the Product or paid as much if the true facts had been known, suffering damages,” the suit says. 

Get class action lawsuit news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.