How do I resolve my Buy Now Pay Later debt?

Dear Iona,

I discovered Klarna last year when a friend mentioned to me that you could use it to buy items and then pay for them later. I then applied for it and bought a laptop. Convinced that my bank details were already linked to the account, I paid very little attention to it. I should have checked my account more but I thought everything was fine. Back in April, I receive a letter saying that my account was closed and handled to a debt collection agency. I contacted Klarna twice and both times, their employees seemed very vague and said that they think it's okay to make payments directly into their account and that no debt collection agency has been contacted. I want to find a way to clear my debt. Can you help?
Giulia, 25

Dear Giulia,

This sounds like it has been a difficult and confusing experience. You tell me you’re originally from Italy, and although you have been living in the UK for five years, you have in the past been very bad with your money, though this has changed since the pandemic and you are getting better at managing your finances, which is great to hear.
It would seem that perhaps you weren’t aware that you had to actively make payments to Klarna, and you assumed they would be automatically deducted from your bank account.
It seems to me that Klarna then sent you the letter to say you had been passed onto a debt collection agency to shock you into making the payments. It’s clear that you didn’t fully understand what was required from you when you signed up, and that there was then a breakdown in communication between you and Klarna. I can’t establish why you didn’t receive payment reminders from Klarna.
I’m glad to hear that you haven’t been contacted by a debt collection agency yet. This can be an unpleasant experience and ultimately end up in court, so is to be avoided.
However, I would strongly urge you to make the payments you owe to Klarna directly as soon as possible. I would then find out how this situation may have affected your credit score.
Whenever you take out credit, it can affect something called your credit score. You need this to be in good condition to ensure you can borrow money in the future for really important things like a mortgage for your first home. If something goes wrong and you don’t pay back the money you owe on time, even if it’s just a bit late, it could end up harming your credit score. The Money Advice Service offers some helpful pointers on how you can check your credit score.
You also need to find out if you have any other outstanding debts and pay them off as quickly as you can.

You seem to be very wary of using BNPL in future, but should you be tempted again, you need to make sure you understand how it works. All the lenders work in different ways and all have different small print.

This small print is really important because we’re dealing with credit here. Whenever you take out credit, you’re borrowing money and with that comes a big responsibility, to pay back what you owe on time and in full.

When you get into a sticky situation with BNPL, it’s always best to speak to the firm you’re dealing with and clearly establish what you should do next. It may be that you can agree new repayment terms – but the longer you leave it, the worse things get.

I’m wishing you the best, Giulia, and I’m sure you’ve learned a lot from what’s happened. Please do contact me again if you have any problems.

UPDATE: This is Klarna’s response to your case. A spokesperson said:

“We can confirm Ms Meloni proactively agreed to our Financing option, which is a regulated product. We can also confirm that we sent appropriate and regular email communications before sending her a termination letter. Her case has not been passed on to a debt collection agency at this stage. 

“We encourage customers who are struggling to pay to get in touch with us to agree a repayment plan that works for them. We want to make it as easy as possible for people to contact us, so we operate on a wide range of channels — 24/7 chat in-app, email, text or phone.”

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