Not upheld: handling of unauthorised transactions, chargeback process failures, poor customer service, credit limit reduction complaint against Klarna Financial Services Limited

Decision detail

Summary

Ms B complained about Klarna's handling of unauthorised transactions made by company R on her credit card after she authorised only an initial $18 subscription payment. Klarna raised chargebacks using incorrect Visa dispute codes which failed, and did not promptly block the card, allowing over 30 unauthorised charges. Klarna acknowledged failings in customer service and chargeback processing, offering £200 compensation, a full refund of all disputed transactions, and removal of adverse credit loadings. Ms B sought higher compensation (£750) and reinstatement of her previous credit limit. The ombudsman upheld Klarna's resolution as fair, finding the £200 compensation appropriate for the distress caused, and rejecting the credit limit reinstatement request as credit limits are determined by automated processes Klarna cannot manually override.

The Ombudsman's reasoning

The ombudsman acknowledged Klarna's failings in using incorrect dispute codes and poor communication, which required Ms B to spend considerable time and effort over several weeks to rectify the problem. However, the ombudsman found that Klarna's offered £200 compensation, combined with the full refund of all disputed transactions and removal of adverse credit loadings, represented fair compensation for the distress and inconvenience caused. The ombudsman rejected the request for credit limit reinstatement as credit limits are determined by an automated process considering multiple factors, and Klarna cannot manually override this system. The ombudsman also noted that credit scores are calculated by credit reference agencies, not Klarna, so the removal of adverse loadings should naturally lead to score recovery over time.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website