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Klarna to report consumer BNPL use to credit referencing agencies

Klarna to report consumer BNPL use to credit referencing agencies

Klarna is to begin reporting consumer use of its buy now, pay later products to UK credit reference agencies, enabling users to build a positive credit history and protect them from building up multiple lines of credit.

Klarna says it will report UK consumer purchases paid on time, late payments and unpaid purchases for Pay in 30 and Pay in 3 orders made on or after 1 June, 2022 to both Experian and TransUnion.

The firm says it has been working with credit agencies over the past two years to help them update their systems in order to receive and process BNPL data in a fair and balanced way.

Whilst reporting on the use of BNPL products will be reflected in UK consumer credit files from June 2022, they will not initially impact UK consumer credit scores as this requires further updates to the scoring mechanisms used by the CRAs.

Klarna's UK head, Alex Marsh, says the initiative will give the financial industry greater visibility on UK shoppers’ use of Klarna’s BNPL products and help to improve affordability assessments. It also means that users who make payments on time can build a positive credit history, showing lenders they use credit responsibly.

“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,” he says. “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 development should support wider efforts to drive better visibility of consumer borrowing and affordability assessments to help ensure consumers are not building up unsustainable debt with multiple providers, a key goal of forthcoming regulations.

Says Marsh: “We are pleased to help protect our UK customers and continue to cement our leadership in responsible lending, now the credit reference agencies are in a position to accept our data. This was a key area of concern highlighted in the FCA’s Woolard Review and we very much took to heart the advice from Chris Woolard at the time to, ‘not wait for regulations before making changes,’”.

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