Not upheld: Credit file / adverse marker disputes complaint against Klarna Financial Services UK Limited

Decision detail

Summary

Mr L complained that Klarna unfairly recorded a default on his credit file after he missed consecutive loan repayments due to ill health and financial difficulties. Mr L took out a £2,000 fixed-sum loan in February 2025 requiring 24 monthly payments of around £80. After making payments in March and April 2025, he missed payments in May and June 2025. Klarna issued a default notice on 15 July 2025 (after two months of arrears) and terminated the agreement on 29 July 2025, reporting a default to credit reference agencies. Mr L argued the default was recorded prematurely and that Klarna should have waited until three months of arrears had accumulated. The ombudsman found the complaint not upheld, determining that by termination, Mr L had missed three consecutive payments (three months of arrears), which aligned with ICO guidance, and that Klarna had provided adequate warnings and support opportunities.

The Ombudsman's reasoning

The ombudsman found that Klarna's actions were fair and compliant with regulatory requirements. While a default notice can be issued when payments become overdue under the Consumer Credit Act 1974, the key issue was whether the default was recorded on the credit file fairly. The ombudsman determined that by 29 July 2025, Mr L's account was in arrears for three months (May, June, and July payments missed), which aligns with ICO guidance that defaults should generally be recorded when accounts are in arrears for between three and six months. Klarna provided adequate warnings, signposting to debt advice, and opportunities for Mr L to engage on forbearance, but Mr L did not meaningfully engage until after termination. The ombudsman rejected the argument that the default notice was issued prematurely, distinguishing this case from others where defaults were recorded with less than three months' arrears.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website