Klarna rolls out UK late fees in bid to curb defaults

The Swedish payments firm will begin charging customers who miss payments a flat £5 fee, a continuation of cost-cutting policies that the company have been implementing over the last year.

The move comes as regulators and governments prepare to clampdown on the BNPL sector after UK ministers confirmed that it would be brought under the remit of the Financial Conduct Authority later this year.

Following this, customers will be allowed to take complaints to the Financial Ombudsman Service. Regulation will also require firms to strengthen their affordability checks on customers.

The UK government recently announced a consultation into new regulations for the BNPL industry.

Writing for City AM today, Alex Marsh, Head of Klarna UK, said: “At times like these, we all have a duty to help consumers. For credit providers this means making responsible lending decisions, helping customers pay on time, and providing extra support to those who fall behind.

Marsh continued: “We’ve concluded that having no fees is not in the best interest of our customers, but we don’t want to rely on fees or charge extortionate amounts like traditional banks who monetise the misery of customers who fall behind. After all, if everyone paid their credit card bill on time, the card companies would go out of business.”

Peter Tutton, head of policy at StepChange Debt Charity, commented: “During a cost of living crisis, it’s more important than ever that consumers are protected from falling into problem debt when taking out BNPL loans.

“At present some consumers may hold multiple BNPL agreements that are unaffordable to them, which puts them at risk of escalating fees if they miss repayments. This is especially concerning as our research suggests a significant crossover between use of BNPL and financial difficulty, with many people borrowing to pay bills or make credit repayments. This link between financial difficulty and late fees is something we have seen in other products like overdrafts and credit cards too.

“The Government and the FCA should be commended for taking action in regulating BNPL and we were pleased to see the latest consultation phase bring regulation one step closer. Until this is in place, we would urge BNPL providers to do all they can to prevent consumers from being faced with unmanageable debt."