Mystery direct debit set up with Klarna? Here’s what’s happened

If you’ve ever made a purchase with Klarna, you might have a new direct debit set up

My panicked partner woke me up on Monday to question a new direct debit set up on our joint Monzo account with the Buy Now, Pay Later provider Klarna. I was naturally concerned – my joint account card was cloned earlier this year and to my knowledge, I’d never used Klarna before.

I was quickly on the phone to Klarna customer services to get to the bottom of the issue and discovered that this has actually happened to a lot of people at the moment. 

If the same has happened to you, here’s what’s happened, and why it’s likely nothing to worry about.

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What is Klarna?

Klarna is a Buy Now, Pay Later provider. You’ll typically see it at the checkout stage when purchasing items online. You can choose between several options when checking out: Pay Now, Pay in 30 Days or Pay Over Time (usually pay in 3).

You may not know that you’ve used Klarna before, especially if you used the Pay Now option, but if you’ve ever used it, a direct debit will have been set up on your account when you did. 

Why have I been notified of a new direct debit with Klarna?

A lot of people have been asking Klarna on X to get some clarity on the situation. Klarna is linking customers to a blog post about legal service team changes, but this doesn’t fully explain the situation. 

Essentially, Klarna has moved all of its financial services from Klarna Bank AB to a new company, Klarna Financial Services UK Limited. It’s mainly due to its permissions in the UK.

Due to this change, Klarna has to alter its direct debit mandates with the new company name. In some cases, this then comes through as a new direct debit set up, when in reality, it’s an alteration of a previous direct debit.

This should only happen if you’ve used Klarna before. I was alarmed at first, but found out that I made a payment using Klarna’s “Pay Now” option back in 2020 – presumably I had issues with the site’s own payment issues and chose to use Klarna instead. 

The risks of Buy Now, Pay Later 

Buy now, Pay Later seems like a great idea, and it’s even been introduced into Monzo and as a feature of Curve. However, there are a lot of flaws with the concept when put into practice. Here are some of the risks involved with Buy Now, Pay Later. You can read more about them in our full guide.

  • You don’t know what you’re agreeing to. It’s never really sold as a loan, which is effectively what it is.
  • It’s not always free. You can be hit with harsh late fees if you fall behind with payments
  • It normalises borrowing. You can get stuck in a bit of a rut of always taking out credit to pay for things.
  • You can wind up spending more. Whether it’s by choosing retailers that offer it and not shopping around, or by adding more to your basket because you’re not paying for it yet, you can end up spending a lot more with Buy Now, Pay Later.
  • It can damage your credit score. It’s too easy to get accepted for the service, and if you can’t afford it and end up missing payments, you can seriously damage your credit.

What should I do?

If you’ve suddenly had a new direct debit set up with Klarna and haven’t made a purchase, you can simply cancel the direct debit in your banking app. I was able to do this by clicking on the notification in my Monzo app and selecting “Cancel Direct Debit”.

Don’t do this if you’re actively paying Klarna back, though, as this could lead to missing a direct debit and getting yourself into financial difficulty. You can check how much you owe in your online account under “Purchases”. If this is £0, you’re good to cancel the direct debit.

I was assured by Klarna’s customer service team that no payment is due to be taken, so this wouldn’t impact me negatively, and if I choose to use Klarna in the future, I’ll be able to set up a new direct debit. If you’re not sure about your situation, give Klarna a call to get some clarity about your account. 

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