Klarna to report UK customer debts to credit agencies

The firm, which is headquartered in Sweden, is understood to have been in talks for two years with credit reference companies Experian and TransUnion, The Guardian reports. The move could affect service users’ credit ratings from 2023.

With 16 million customers, Klarna is the leading BNPL provider in the UK. When it begins sharing its users’ data from 1 June, credit card companies will be able to view transactions and debts when undertaking checks on prospective borrowers.

But consumer credit scores will only begin impacting customer credit scores after 18 months – the end of 2023.

BNPL products are currently unregulated in the UK, and MPs and firms have faced pressure from campaigners and MPs, who say more should be done to protect customers from taking on more debt than they can afford.

In 2021, MP Stella Creasy urged for regulation: “I am very concerned by any websites which prioritise BNPL. I’m very concerned by any companies that actually offer discounts to push people onto using BNPL. 

"I want to see responsible retailers step in where the Government has failed. It is a ticking time bomb particularly of younger consumers”.

Klarna’s agreement are likely to put pressure on competitors to follow suit.

However, it could also result in customers turning to rival BNPL providers to hide debts from credit reference agencies.

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 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”.