Yahoo Finance Klarna's new credit card accused of leaving 'shoppers at risk'
Shoppers using a high-profile new card from Britain’s biggest “buy now, pay later” firm could be left without any legal protection if a purchase goes wrong.
Klarna Card offers customers the chance to purchase items in shops without paying anything for up to 30 days. The card is a 0pc Visa credit card linked to the user's Klarna account.
However, experts warned shoppers will not be entitled to the crucial consumer protections usually given to credit card users.
The cards are not covered by Section 75 regulations, which allow buyers to make a claim against their credit card provider in the event of a problem with their purchase.
Klarna's card is also not covered by the Financial Ombudsman Service, which mediates disputes between consumers and firms.
Users are instead covered by the lesser chargeback scheme, which allows them to ask for transactions to be reversed in certain situations.
Martyn James, of complaints website Resolver, said: "The lack of regulation means consumers are fundamentally at risk if things go wrong and they can't pay back the cash.
"This is not a philanthropic gesture on the part of the business – it's designed to make it easier for you to buy things you might not be able to afford. Without clear and transparent warnings in place, the industry still needs to do much more if it wants to be a responsible lender."
Myron Jobson, of Interactive Investor, the fund shop, said: “It sounds like a credit card, and it looks like one too, but crucially from a regulatory perspective, it isn’t one. This card further blurs the line between regulated and unregulated debt."
A spokesman for Klarna said: "We have been careful not to describe it as a credit card. It is different from a credit card in important ways – including the fact there is never any interest, repayments are linked to a specific purchase, and spending limits are re-evaluated on a daily basis."
Klarna said it planned to add additional payment options in the future.
The buy now, pay later industry is currently unregulated but the City watchdog, the Financial Conduct Authority, recommended the sector come under its auspices last year. Further details about how this regulation will occur are expected to be announced soon.
Klarna, the biggest firm operating in the sector, conducts “soft” credit checks on its customers and has previously stated it would welcome industry-wide regulation. The firm said if card customers missed payment dates, they would be unable to make any future purchases until any debt was cleared.
Mr Jobson added: “Regulation can’t come soon enough as the increase in the cost-of-living risks even more people turning to BNPL schemes to help tide them over."
Klarna said it had a waiting list of 400,000 consumers and would begin sending out physical cards this week. Visa did not respond when approached for comment.
