Klarna to report customer debts and payments to CRAs | moneyfacts.co.uk

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Michael Brown

Content Writer
Published: 04/05/2022

The UK’s biggest Buy Now Pay Later provider will share its customer debt and payments with Experian and TransUnion from 1 June.  

From 1 June, Buy Now Pay Later (BNPL) provider Klarna will start sharing its customers payments made on time, late payments, and unpaid purchases with credit reference agencies.

Experian and TransUnion will be the first credit reporting agencies to receive this information.

This means that if a consumer falls behind on any repayments, their credit score will worsen. Equally, if a consumer repays their debts on time their credit rating will improve.

“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 1 June 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.” 

The move comes at a time when the BNPL market is facing pressure from lobbyists to be regulated. In February, Klarna, Clearpay, Openpay and Laybuy all changed terms in their contracts after pressure from the Financial Conduct Authority (FCA).

Currently, if a customer falls behind on their Klarna repayments, their credit score will remain unaffected. Instead, they will be referred to a debt collection agency.

This is common with other BNPL providers. Yet around 47% of people surveyed by Creditspring, a loan subscription provider, did not know that a BNPL user could be referred to a debt collector if they missed their payment. 

"Worst-case scenario is that borrowers can end up receiving a knock on the door from a debt collector, but currently the vast majority are completely unaware this is even a possibility," said Neil Kadagathur, Co-Founder and CEO of Creditspring. 

BNPL vs 0% credit cards

Depending on your own finances and credit rating, a 0% credit card could be a preferable option for you.  

This type of credit card generally offers customers an interest-free introductory period in addition to other possible perks and rewards.

The M&S Bank Credit Card Shopping Plus Offer Mastercard, for example, allows its users to earn M&S points on their purchases.

Moreover, credit cards also offer consumers protection under Section 75 of the Consumer Credit Act, which BNPL offers do not guarantee. Section 75, in essence, allows consumers to claim for purchases on credit cards of between £100 and £30,000 to be refunded in the event that goods were damaged or never arrived.

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