I know Karlach is supposed to be the paladin, but she should have been a warlock with a pact with Zariel.
Warlocks aren't the only ones making deals with fiends. Oathbreaker and Paladins of Conquest also serve fiends, including the baatezu. Xanathar's Guide to Everything even mentions paladins of conquest serving Bel, the former overlord of Avernus.
a pact with Zariel. It could have been a brand new Baldur's Gate exclusive warlock subclass. It would generate a lot of buzz.
More like a description of a typical Fiend Warlock.