Klarna will report product usage and missed payments to UK credit reference agencies

Purchase and payment service Klarna will start reporting the use of Buy Now Pay Later (BNPL) products to UK credit reference agencies from June.

It will flag consumer purchases paid on time, late payments and unpaid purchases for “pay in 30” and “pay in three” orders placed on or after June 1 to Experian and TransUnion.

Klarna said the move will protect customers and provide the industry with greater visibility into the use of BNPL, helping to improve affordability ratings.

“It is alarming that UK consumers are still being forced to take out high-cost credit cards to demonstrate that they can use credit responsibly and build their credit profile,” said Alex Marsh, director of Klarna UK.

“That will start to change on June 1 this year, as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.”

Although reports on the use of BNPL products will be reflected in consumer credit records from June 2022, this will not have an initial impact on UK consumer credit scores as it requires further updates. rating mechanisms, Klarna said.

He said other previously announced changes include updated text at checkouts to clearly state that BNPL options are credit products, with consequences for missed payments and the introduction of an internal complaints arbitrator.

Concerns have been raised about the rapid growth in popularity of BNPL companies in general. While BNPL products can help people avoid paying interest on their loans, people can rack up debt quickly by using them as an option at online checkouts.

The Woolard review previously found that the use of buy now, pay later products nearly quadrupled in 2020, to £2.7 billion.

In February, the Financial Conduct Authority (FCA) said some BNPL companies had agreed to change the terms of their customer contracts to make them fairer and easier to understand.

The UK government plans to change the law to incorporate certain forms of unregulated BNPL products into FCA regulations.

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