Klarna Discontinues a Credit Product Affecting Thousands

Published 6 months ago

Klarna, a leading Buy Now, Pay Later (BNPL) service provider, has decided to discontinue one of its regulated credit products. This move affects approximately 90,000 customers who have been using the service to finance larger purchases.

Technical Issues Cause Customer Concerns

The product in question, Klarna’s “Financing Account,” recently experienced technical difficulties that have been impacting customer credit scores for the past five weeks. Reports indicate that payments made via direct debit were not being properly recorded in Klarna’s system. As a result, customers’ accounts erroneously reflected missed payments, which could potentially harm their credit ratings. Despite these issues, sources claim they are not the reason behind the product’s termination.

The Financing Account’s Features and Drawbacks

The Financing Account offered by Klarna differed from the company’s standard BNPL service, as it allowed customers to charge multiple items to the account and pay them off over time, with interest, much like a credit card. This option was particularly useful for expensive items such as electronics or furniture, with repayment periods ranging from six to 48 months.

Customer Service Complaints Arise

Customers have expressed frustration over the lack of communication from Klarna, with some reporting no response for over two weeks after raising concerns about their payments not being recognized. The company has since ceased reporting payment information to credit reference agencies like Equifax and TransUnion after acknowledging the issue.

The Future for Klarna’s Financing Account

Klarna’s decision to close the Financing Account to new customers will be fully implemented once all outstanding balances are settled. Despite the closure, the majority of Klarna’s UK customer base uses its unregulated BNPL products, with the affected Financing Account users accounting for only about 0.5% of its 18 million UK customers. The impact of this move may be limited in scope, but it’s significant for those who relied on this specific credit facility.