New York (AP) – More Klarna customers find it difficult to repay their loans “buy now, pay later,” said the short -term lender this week. The disclosure corresponded to the reports of the Bankrate and Lendingtree loan platforms, which cited an increasing part of all users “buy now, pay later” saying that they had lagged behind payments.
Late or missed payments are a sign of failing financial health among a segment of the American population, according to some analysts, while the total debt of the country’s consumers increases to a record of 18.2 dollars and the Trump administration moves to collect federal student loans.
Buyers who choose to finance purchases via BNPL services tend to be younger than the average consumer, and a federal reserve study last year said that black and Hispanic women were particularly likely to use the plans, that customers of all income levels are increasingly adopting.
“While BNPL offers credit to financially vulnerable consumers, these same consumers can outdo themselves,” wrote the authors of the Federal Reserve Study. “This concern is consistent with the previous research which has shown that consumers spend more when the BNPL is offered during verification and the use of BNPL leads to an increase in overdraft and payments and payments of credit cards.”
While Klarna increases its user base and its income, the Swedish company said that its consumer credit losses in the first quarter had increased by 17% compared to the period in January-March from last year, to $ 136 million.
A company spokesperson said in a statement that the increase largely reflected the higher number of loans Klarna granted year to year. The percentage of its loans at a global level which was not paid in the first quarter increased from 0.51% in 2024 to 0.54% this year, and the company sees “no sign of a weakened American consumer”, he said.
More consumers use plans “ buy now, pay later ‘
Buy now, pay for subsequent plans usually allow consumers to divide payments for four payments or less purchases, often with a cash deposit. Loans are generally marketed as a zero interest and do not require credit verification or gentle credit verification.
BNPL suppliers promote plans as a safer alternative to traditional credit cards when interest rates are high. The popularity of delayed payment plans and the expansion ways that customers can use them have also aroused public attention.
When Klarna announced a partnership with Doordash in March, the news led online comments on contractual Americans to buy take -out food. Similar skepticism emerged when Billboard revealed that more than half of the participants in Coachella used payment plans to finance their tickets for the music festival.
An April Lendingtree report said that around four out of ten users from Buy now, Pays Subsequent Plans said they had made late payments in the past year, compared to one in three last year. According to a bank report by Bankrate, approximately one in four user of loans chose them because they were easier to obtain than traditional credit cards.
The six largest suppliers of BNPL – Affirm, Afterpay, Klarna, Paypal, Sezzle and Zip – created around 277.3 million loans for $ 33.8 billion in goods in 2022, or an amount equal to around 1% of credit card expenses this year, according to the Consumer Financial Protection Bureau.
An industry that is done less regulatory examination
The Federal Agency said this month did not intend to apply a Biden era regulation which had been designed to put more borders around Fintech lenders.
The treated rule Buy now, pay for subsequent loans such as traditional credit cards under the Act respecting the truth in loans, requiring disclosure, reimbursement processing, an official litigation process and other protections.
The regulations, which entered into force last year, also prevented borrowers from being forced to automatic payments or charged multiple costs for the same missed payment.
The Trump Administration said that its non-application decision had come “in the interest of concentrating resources on the support of American taxpayers who work hard” and that it “would rather retain its application and supervision resources focused on pressing threats to consumers, in particular soldiers and veterans”.
Consumer defenders argue that without federal supervision, customers looking for reimbursements or looking for clear information on BNPL structures and interest rates will have less legal appeal.
There are risks to contract payment loans
Industry observers point out that consumers contract loans that they cannot afford to reimburse as a higher risk of using BNPL. Without the credit offices while keeping the new form of credit, there are fewer guarantees and less surveillance.
Justine Farrell, president of the Marketing Department of the Knauss School of Business at the University of San Diego, said that when consumers were unable to make loan payments, this aggravates the economic stress they already experience.
“Consumers’ financial positions feel thinner than they have done for a long time,” said Farrell, who studies consumer behavior and BNPL services. “The cost of food continues to go up, in addition to rent and other goods … Consumers therefore benefit from the ability to pay items later.”
The Federation of American Consumers and other surveillance organizations have expressed their concern about the reduction of BNPL regulations while the use of loans continues to increase.
“By adopting a head approach in the sand of the new Fintech loans universe, the new CFPB again promotes major technologies to the detriment of everyday people,” said Adam Rust, director of financial services to the Consumer Federation of America.
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The Associated Press receives the support of the Charles Schwab Foundation for educational and explanatory reports to improve financial literacy. The independent foundation is distinct from Charles Schwab and Co. Inc. The AP is solely responsible for his journalism.
