Shopping and payment service Klarna will start reporting the use of Buy Now Pay Later (BNPL) products to UK credit bureaus from June.
On-time consumer purchases, late payments, and unpaid purchases for Pay in 30 and Pay in three orders placed on or after June 1 will be reported experiential and TransUnion.
Klarna said the move will protect customers and give the industry greater visibility of BNPL usage, which will help improve affordability ratings.
“It’s alarming that UK consumers are still being forced to buy expensive credit cards to show they can use credit responsibly and build their credit profile,” said Alex Marsh, Head of Klarna UK.
“That will 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 are able to demonstrate to other lenders that they are responsible in their lending practices.”
While reporting on the use of BNPL products will be reflected in consumer credit files from June 2022, it will initially not impact UK consumer credit scores as it will require further updates to the scoring mechanisms, Klarna said.
Other previously announced changes include updated checkout text to clarify that BNPL options are credit products, with consequences for missed payments and the introduction of an internal appeal judge.
Concerns have been raised about the rapid growth in popularity of BNPL firms in general. While BNPL products can help people avoid interest on their borrowing, people can quickly build up debt by using them as an option at online checkouts.
The Woolard Review previously found that the use of “buy now, pay later” products nearly quadrupled in 2020, totaling £2.7 billion.
In February, the Financial Regulator (FCA) said some BNPL firms have agreed to amend the terms in their customer contracts to make them fairer and easier to understand.
The United Kingdom government plans to amend the law to bring some forms of unregulated BNPL products under FCA regulation.
https://www.independent.co.uk/news/uk/shopping-experian-government-financial-conduct-authority-b2071145.html Klarna to report product usage and missed payments to UK credit bureaus