UK

Klarna to report product use and missed payments to UK credit reference agencies

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hopping and payments service Klarna will start to report the use of buy now pay later (BNPL) products to UK credit reference agencies from June.

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

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

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

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

While reporting on the use of BNPL products will be reflected on consumer credit files from June 2022, it will not initially impact upon UK consumer credit scores as this requires further updates to scoring mechanisms, Klarna said.

It said other changes previously announced include updated text at checkouts to make it clear that BNPL options are credit products, with consequences for missed payments and the introduction of an internal complaints adjudicator.

Concerns have been raised about the rapid growth in popularity of BNPL firms generally. While BNPL products can help people avoid paying interest on their borrowing, people may rapidly build up debts through using them as an option at online checkouts.

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

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

The UK Government plans to change the law to bring some forms of unregulated BNPL products into FCA regulation.

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