Buy Now Pay Later campaign: update #2

Last Friday, I received a formal letter from Klarna in response to the campaign. This was preceded by a conversation on Zoom and a series of emails in which I asked them for the response to 8 important questions. The aim of these was to help to shed light on the inconsistencies in circulation and the reported experiences of Klarna customers. So far, they have refused to answer these questions.

“What is the procedure for when debts are written off by the DCAs? Could a customer face a CCJ for example? What are all of the possible outcomes?”

You state on your site that using Klarna Pay in 30 days or Pay in 3 instalments cannot impact your score, is there any way the use of these products could indirectly impact a person's credit score?”

View the full list of questions here.

I believe it is reasonable for a consumer to understand all the possible consequences of using financial products, but Klarna will not share this information. These are important questions that consumers deserve answers to.

The overwhelming message of the their letter was that I had disseminated false information about their products. This is untrue. All the information on the campaign site was sourced from Klarna themselves or their retailers. The stories shared only support this information.

For example:

Credit score damage

Klarna has said that credit scores cannot be damaged, even when a payment is missed. They deny this ever being possible. This contradicts information provided by ASOS, H&M, Gymshark and over 20 retailers. Information that is still live on these websites.  We have asked Klarna for more information on the origin of this information. This information may shed light on the stories of consumers who might have experienced a drop in their credit score after using Klarna. We will update you once we have clarity on how these contradictions have emerged.  

Debt collection

Since launching the campaign, Klarna have shared details about the procedures used by their debt collectors. They state that their debt collectors do not report to credit reference agencies. This contradicts information provided by Klarna's own customer service teams which informed the information on the campaign page. Klarna has stated that this information was never accurate and they are retraining their customer service teams. We have asked them for more details about their debt collection procedures and all the possible consequences of using their products. 

Three requests for Klarna

  1. That they pledge to work with retailers to ensure Klarna is not the pre-selected default payment option. The campaign has revealed countless stories of consumers accidentally using Klarna. This should not be allowed to happen.

  2. They retract the threat of legal action on the basis that the campaign has shared information provided by their own retailers and explain how this information has come about

  3. That they provide answers to the questions I put forward to them on the 26th June. I understand that some of these questions might be commercially sensitive. If this is the case and the answers do not have significant implications for consumers, I will gladly view these under an NDA

Consistency, trust and transparency are so important when it comes to financial information, values that would be enforced if these products were regulated. It’s because they’re not that consumers are left confused, and without vital information to make good financial decisions.⁠

Buy Now Pay Later is the future of credit and retail. It's here to stay. That means there is an unimaginable amount of power in the hands of just 2-3 companies, one of whom has significant market share. We’re at a critical point. What happens next will determine the direction of this industry. Either towards regulation, protection and transparency or, without change, an inevitable race to the bottom at the expense of the most vulnerable. ⁠

This is not about whether these products are useful or not, they can be. This is about whether there’s enough protection in place to prevent a debt crisis. Without regulation, this will happen… it’s already happening... we’ve seen a 10 fold rise in bankruptcies amongst 18-25-year-olds from 2016 to 2019. If you want to get a sense of what this looks like, search ‘Klarna’ on TikTok.⁠

This week, Klarna will launch a PR campaign, Klarna Sense. This is a start but I sincerely hope they will consider taking practical action and answer important questions that so far, they have refused to answer. ⁠

Consumers deserve more than glossy TV ads. They deserve honesty and consistent information to make good financial choices. Only then can you expect personal responsibility.