Klarna Finds CFPB BNPL Regulation Perplexing

The US Consumer Financial Protection Bureau’s new rule on buy now, pay later lenders has gotten mixed reactions from industry players. Affirm is happy with the result, but rival Klarna needs clarification.

The CFPB recently released its ruling, stating that BNPL lenders should be treated the same as credit card companies.

This means providers must offer users key legal protections and rights like those for regular credit cards. These include the right to dispute charges and ask for a refund from the lender after returning a product bought with a buy now, pay later loan.

Klarna Aims To Ensure Fair Regulations For Buy Now, Pay Later (Bnpl) Services

Affirm stated that it is glad that the CFPB is pushing for consistent industry standards, many of which Affirm already follows, to give consumers more choice and transparency.

Klarna further added that it supports “fair” regulation and that the new rule doesn’t need any significant changes to its enterprise.

However, the Swedish company also stated that regulating BNPL like a credit card is like comparing apples to oranges.

The firm points out other countries, like Australia and the UK, see the “important differences” between credit cards and BNPL.

According to the statement, Affirm hopes the CFPB will understand that BNPL and credit cards are very different and should be treated differently.

Klarna Seeks To Provide Transparent And User-Friendly Financial Services

The statement also reveals that Klarna’s BNPL is a short-term, no-interest loan with no fees if paid on time. The team makes sure to check every transaction so they only lend to people who can pay back, as shown by their global default rate of 1%.

This system gives users a clear and predictable way to pay back, helping them manage their finance without the worry of interest building up.

Klarna Bank AB, often called Klarna, is a Swedish company that offers online financial services. It handles payment processing for online stores, managing both customer payments and store claims. Klarna also provides “buy now, pay later” services.

In the future, the fintech wants the CFPB to understand the “big differences” between BNPL and credit cards, saying that they work in “basically” different manners.

Klarna had more than 5,000 workers, mainly in Stockholm and Berlin. In 2021, Klarna handled about $80 billion in online sales. Around 40% of Sweden’s online shopping sales went through Klarna by 2011.

In 2021, it was worth $45.6 billion, making it Europe’s top private tech company. But in 2022, its value fell to $6.7 billion after having difficulty attracting more outside investors.