Pagaya, an AI-powered underwriting fintech, is suing Klarna, alleging the BNPL company misappropriated its trade secrets and breached their license and loan-sale agreements. Filed in Delaware federal court, the suit claims Klarna used Pagaya’s subprime point-of-sale underwriting model, learned through their partnership, to enter the US market, win merchants like Walmart, and build a roughly $2B consumer-lending business, then stopped honoring its commitment to sell those loans to Pagaya. Klarna calls the allegations false, saying it terminated the relationship in March as was its contractual right and that Pagaya responded with a meritless suit it will fight. The partnership dated to 2022, when Pagaya began buying point-of-sale loans Klarna declined, and the dispute now threatens two securitizations where Klarna was the sole loan originator.
