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Klarna’s huge restructuring means missed payments will now affect your credit score

It will report timely paid consumer purchases, late payments, and unpaid purchases for Pay in 30 and Pay in three orders placed on or after June 1 to Experian and TransUnion

Millions use Klarna-powered Buy Now, Pay Later services to distribute payments without paying interest
Millions use Klarna-powered Buy Now, Pay Later services to distribute payments without paying interest

Shopping and payments service Klarna will start reporting the use of Buy Now Pay Later (BNPL) products to UK credit bureaus from June.

It will report timely paid consumer purchases, 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 give the industry greater visibility of BNPL usage, which will help improve affordability ratings.

Alex Marsh, Head of Klarna UK, said: “It is alarming that UK consumers are still being forced to purchase expensive credit cards to demonstrate they can use credit responsibly and build their credit profile.

“That will change on 1 June this year as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time are able to demonstrate to other lenders that they are responsible in their lending practices.”

While reporting on the use of BNPL products will be reflected in consumer credit files from June, it will initially have no impact on UK consumer credit scores as it will require further updates to scoring mechanisms, Klarna said.

Is Klarna working for you? Contact us: mirror.money.saving@mirror.co.uk






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Other previously announced changes include updated checkout text to clarify that BNPL options are credit products, with consequences for missed payments, and the introduction of an internal arbitration board for complaints.

Concerns have been raised about the rapid growth in popularity of BNPL firms in general. While BNPL products can help people avoid interest on their borrowing, people can quickly build up debt 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 stand at £2.7 billion.

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

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

Jenny Ross, which ones? Money Editor said, “Using Buy Now Pay Later is an easy and convenient way to pay millions. However, with little to no information or warning currently available about the risks of late fees or debt, there is a concern for many buyers who do not fully understand the products they use.

“The move by BNPL providers to work with credit bureaus to report customers’ BNPL usage and missed payments is a step in the right direction as it could help mitigate the risk of consumers using more BNPL credit absorb than they can afford.

“However, this does not relieve the urgent need for all BNPL firms to be government regulated as soon as possible to ensure users are adequately protected.”






Critics argue that the platforms are luring people into debt — and the stats show the same thing

What are buy now, pay later suppliers and where exactly is the problem?

Buy Now, Pay Later plans allow you to buy items and pay later — typically within 30 days with no interest or hidden fees.

Around £2.7 billion was spent on it last year – essentially debt that has quietly accumulated.

It’s available on hundreds of retail websites and counting – from Asos to Halfords.

Worryingly, buyers can take out multiple contracts with different vendors, and there are no affordability checks — meaning no one checks first whether you can afford the debt.

Failure to repay will flag your credit file and affect your score.

Debt organizations and activists have argued that promoting these payment options via social media, often through influencers, has glamorized debt. They say it’s aimed at naïve twenty-somethings.

They also suggest the services can make it too easy to get into unpayable loans.

Sarah Coles, financial analyst at Hargreaves Lansdown, said clients need to be aware of “hidden dangers”.

“Buy-now-pay-later has mushroomed in the shadow of the pandemic, and millions more people have taken on that debt,” she said.

“The health crisis means millions of people are living on less and are looking for ways to spread their money further. Many of them are now stuck at home where the temptation to shop online has been overwhelming.

“The fact that this borrowing is interest-free makes it safer, but there are dangers. Less scrutiny of borrowers means more risk of people taking on debt they can’t handle. If buyers can’t afford payments, they may have to pay late payment fees and start bearing arrears.”

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https://www.mirror.co.uk/money/huge-klarna-shake-up-means-26868591 Klarna's huge restructuring means missed payments will now affect your credit score

Fry Electronics Team

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