Klarna will now report product use and missed payments to credit reference agencies

Klarna is to begin reporting customer use of its buy now pay later (BNPL) products to UK credit reference agencies from June 2022. 

The company will report consumer purchases paid on time, late payments and unpaid purchases for “pay in 30” and “pay in three” orders 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.

Alex Marsh, head of Klarna UK, said: “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.”

“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 in UK consumer credit files from June 2022, it will not initially impact consumer credit scores as this requires further updates to the scoring mechanisms, Klarna said.

READ MORE: BNPL is a “market that’s here to stay” – but what does the future hold?

The company will also introduce other changes including 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.

The Woolard Review found that the use of BNPL products nearly quadrupled in 2020, amounting to £2.7 billion.

In February 2022, the Financial Conduct Authority said some BNPL firms had agreed to change the terms in their customer contracts to make them fairer and easier to understand.

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

Which? Money editor Jenny Ross added: “Using buy now pay later is an easy and convenient way to pay for millions.”

“However, with currently little to no information or warnings about the risks of incurring late fees or getting into debt, it raises concerns that many shoppers do not fully understand the products they’re using.

“BNPL providers’ move to work with credit reference agencies to report customer BNPL usage and missed payments is a step in the right direction, as it could help mitigate the risk of consumers taking on more BNPL credit than they can afford.

“However, this does not remove the urgent need for Government regulation of all BNPL firms to follow as quickly as possible to ensure users are properly protected.”

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