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CREDIT CUT

Klarna has made a MAJOR change on spending limits – and shoppers are not happy

HARD-UP Americans have had their spending limits cut by Klarna - after the Buy Now, Pay Later provider suddenly clamped down on lending cash.

Klarna is wildly popular in the US with shoppers looking to ease pressure on their finances by paying over time.

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Klarna is clamping down on lending cash

The service, with more than 20million users, allows customers to buy an item for just a quarter of the price upfront, and then pay the remainder in three installments every two weeks.

But many US shoppers this week found their purchase power - how much they can spend on their Klarna account - was drastically reduced or cut to zero.

One US customer wrote on Trustpilot: “I have been using Klarna for at least six months. I have never missed a payment and my limit had been raised to $800.

“Today, after completing a payment, I noticed my spending limit had been lowered to $200 for absolutely no reason. I have been a loyal and good paying customer.”

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A second added: “Klarna just dropped me to a $40 spending limit from $1400! Never missed a payment and been with them a year.

“I suggest you reverse whatever you did to all of us. You are going to lose a lot of customers this way.”

Klarna initially implied the cuts were due to the company starting to use customers’ credit history to determine their spending limits.

Klarna told customers who complained on Trustpilot: “We've recently updated our automatic decision process with credit history.

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Purchase Power is now reviewing each customer's credit history with a soft check to determine a limit, which is intended to help us lend as responsibly as we can.”

But in a statement to The Sun, a spokesman said it had always performed soft searches on customers, and instead put the changes down to increasing interest rates and inflation.

He said: "Due to increased inflation and interest rates some customers will have seen their Purchase Power reduced."

Amid the hundreds of similar complaints seen on review sites and social media, other customers criticized the firm for its lack of notice.

One fumed: “No email, no notification, just a quick change.

“I went from $2.5k to $15. It's comical, but they're laying people off, so guess we don't fit their biz model anymore.”

Klarna last month announced plans to cut a tenth of its workforce amid challenging economic conditions.

The cuts come after the Consumer Financial Protection Bureau (CFPB) in December launched an inquiry into the Buy Now, Pay Later (BNPL) market amid fears it was causing too much debt.

A Klarna spokesman said: "As a responsible lender, we are committed to supporting sensible spending habits to help ensure the financial wellness of our customers.

"Unlike credit card companies, we regularly assess how much we should loan customers based on credit history, payment history, any outstanding Klarna balances, as well as external factors including economic trends."

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