Offering Klarna on Deliveroo is a new low

[Lunar270]

Usually I'm on the fence with lenders and credit. Adults should be able to manage themselves but credit companies definitely prey on the most vulnerable (including those less financially literate).

But suddenly offering credit on Deliveroo seems a despicable move, especially in the current climate.

I suspect some will say, don't use it, but I can't help thinking that many will out of desperation.

Or perhaps credit just won't be available to those who are the most desperate?

YABU: it won't make any difference.
YANBU: It's going to promote a negative spiral for the vulnerable.

It's awful. I'm pretty sure dominos pizza were called out for this a while ago. Didn't MSE Martin have something to say about it?

I'd understand if it was just on the food delivery from a shop. Like oh I can't afford milk and bread this close to payday I'll have to klarna it from deliveroo. But yeah not on a fancy takeaway.

It's completely irresponsible lending praying on people who need help most.

It's not just the desperation angle that concerns me. I think lots of people will be sucked into the trap of ordering takeaways more frequently than they can afford and paying for them on credit even though they might have the money to have them, just less frequently. Then it builds up and up and before you know it you have a fair sum of debt to sort out which, in the current climate, might not be easy to do with your salary.

It's also available at B&M bargains. People paying weekly for their washing powder. It absolutely stinks.

You’re right and I’m also really surprised the way Klarna is everywhere after what happened to Wonga. The regulator shouldn’t allow it for paying for anything that could be considered short term (like takeaway!).

Yanbu. I was just thinking about this yesterday.

Whilst doing “pay in 3” won’t affect credit scores the data collected on your pay in 3 will be visible to lenders and will show up in reports. Mortgage lenders might include pay in 3 commitments into affordability checks.

www.klarna.com/uk/customer-service/perform-credit-check-affect-my-credit-score/

It will increase debt for the most vulnerable.

@Wishyfishy the difference with Klarna is that there isn’t interest accrued like there was with wonga. Which in some ways is worse I suppose as may well make it more appealing and seem like “not real” debt.

the regulations being brought in are due to take effect next year I think but any payments on it now will be taken into account on credit reports as the data is shared with Experian

Their argument is that people can pay over time without interest unlike credit cards or overdrafts and is useful for essentials when money has run out before payday, which sounds fair enough.

However, it surely must be far more expensive to get your groceries from Deliveroo than a supermarket? No-one is going to bring you a fiver's worth of bread, milk, eggs and beans to your door without adding a significant mark up to make it worth their while are they?

But in reality, it's likely going to be used more by the 'fancy a takeaway but don't have the cash today' people, and is an expensive way of getting takeaway anyway, because of the cost of Deliveroo's cut, plus the risk of people sleepwalking into building up debt that they can't afford to repay and kicking the can down the road about getting help dealing with it.

But it's not surprising from a company with such an exploitative business model, perhaps it's a sign of their desperation. I'm not sure they'll have that long for the world. They don't make a profit and it's all propped up by cheap debt so might come crashing down anyway.

@Wishyfishy unfortunately a lot of Klarna is unregulated - as it's 'split payments' and not a regulated credit agreement (I work for the Ombudsman)

The FCA are looking to change the regulations of short term finance linked to goods and services but my god the wheels grind slowly.

As a side note, I worked huge swathes of cases from amigo loans and wonga/118 money/quick quid, it was despicable the way these companies were allowed to lend. One consumer had 62 loans in an 8 month period. Then wonga went bust and they didn't get the compensation/refunds they were owed.

It started with Provident doorstep lending, then catalogues, then payday loans, Klarna is just the next in a long line of hideous companies praying on the vulnerable.

On my credit report it is listed as a separate category and is definitely a negative flag in a way that a credit card (used responsibly isn't)

I previously have used it on occasion - I have had the funds just spread cost out but would now avoid it altogether to avoid that negative indicator in report.

Initially I was horrified but to be honest what’s the difference between someone using credit to pay for a take away they can’t afford or fancy shoes they can’t afford? Same thing. Still irresponsible borrowing.

I use Klarna a lot. I like the fact I can order a shit load of stuff from h and m or Asos and only pay for what I keep. But that’s how I use it - I don’t use it for credit as such. Although it is credit. It’s more like giving me the option to have a virtual changing room.

People have always been able to use credit cards for whatever they like.

You have a point but I think it's because shoes etc. aren't essential (can't believe I'm saying that!) but food is. Perhaps not takeaways but I just can't see the positives.

I've never used Klarna but credit isn't always a bad thing if used responsibly and is manageable. But I think this type has already proven itself to be a slippery slope.

I use Klarna a lot. I like the fact I can order a shit load of stuff from h and m or Asos and only pay for what I keep

But you can use a credit card for that. Klarna is solving a problem that doesn't really exist and disadvantages consumers because it doesn't offer the protection you get with credit cards.

If lenders view Klarna in the same way as payday loans, it's going to blight people's credit records when in reality they'd do a lot better to use a credit card for some of their normal spending, especially that where it's likely a high percentage of goods are returned, starting with a 'credit builder' card if needed. Plus you can get cashback with a credit card, unlike Klarna etc.

Klarna is shit. I rang them on behalf of my adult daughter when her phone and bank card were stolen- she had to cancel her card and her klarna payment linked to that card bounced. I rang them to pay the account in full on her behalf (she said she would forward the money back to me which was about £30) so that it was one less thing to stress about, as she was already trying to sort out accessing her online banking, replace her card and phone around working over 55 hrs a week.
Klarna refused to take the payment over the phone- I was offering to pay the account in full and they said no, they don’t take payments over the phone. In the end she did manage to get it sorted, but I got the feeling from the person on the other end of the phone that they were almost pleased that she couldn’t pay the account.

Yeah, I thought that. Many a time, we’ve fancied a takeaway the day before payday but would never resort to that. We’ve a hard and fast rule re takeaways/meals out (basically anything non
essential which can wait) It isn’t allowed to go on the credit card. Credit card is for emergencies only to tide us over to payday, a Chinese takeaway isn’t an emergency 🙄

I see what you’re saying but Klarna is really user friendly. The app works really well. I do have a credit card as well that I use for bigger purchases (house stuff, I actually haven’t used it for ages and I’m just paying it off at 0%) but Klarna shows me in a very individual and visual way (ie photos of each item, which is handy if you have multiple orders from the same shop) what’s coming / what I’ve got to pay / what’s waiting to be refunded etc. I can tell it when I’ve returned something and it puts the payment on hold and then updates it quickly when it’s received by the seller. I don’t think people understand how convenient it is until you’ve used it.

That’s how I use it but didn’t realise it was frowned upon by credit rating companies.

I think it’s only the pay in 3 thing that affects credit ratings negatively. I only ever do the pay in 30 days thing and always pay as soon as I know what I want to keep. Since I’ve been using it my credit rating has gone up and up - but this may be to do with the fact I’m clearing a lot of debt each month, but either way Klarna isn’t affecting it. (My credit rating is very good, much higher than average).

Thank you, that’s reassuring

It's hideous. I know there will be many comments about not buying expensive takeaways you can't afford etc etc.

My comment is just to point out the misery of poverty. Being exhausted from long hours, and cold because there's no heating and stressed and miserable swinging from one crisis to the next. Doesn't inspire you to spend several hours batch cooking lentils does it.

The small joy of a takeaway is huge in that context. The warmth, the fat and sugar hit etc etc. Very hard to avoid, less expensive and dangerous than many other escapist coping mechanisms.

My comment is just to point out the misery of poverty. Being exhausted from long hours, and cold because there's no heating and stressed and miserable swinging from one crisis to the next. Doesn't inspire you to spend several hours batch cooking lentils does it

But 'hours of batch cooked lentils' isn't the only alternative to a takeaway.

You can get takeaway like food from a supermarket that microwaves in a few minutes and is a third of the cost.

Make something quick and easy like an omelette or egg on toast.

It's very rare that it 'has' to be a takeaway that you need credit to buy.

I don't know much about it myself. I've seen it offered when I have bought something online but never used it.
My whole family are terrible with money. They are nearly all unemployed claiming benefits (not bashing, just stating a fact). They all borrow money, off each other, other people, loans, credit etc. However they can get their hands on more money. They're not bothered about the ethics of these companies, they're just glad they exist so they can use them.
It is a miserable existence if you've got not much going on in your life and very little money.
Using klarna for a takeaway will be a highlight in a lot of people's hard lives.
The debts spiral. They don't care. They don't have the means to repay it anyway.
It doesn't matter if they owe £500 or £5000. If they can't afford to repay it then there not bothered if the figures keep growing.
It's a mindset.
Getting rid of these companies won't change that.
If I'm honest, I'm not sure what, if anything will.

The problem with all these things, when you’re on a low income, is that they put you into an ever increasing cycle of debt. 20 odd years ago, as a poor single mum, I got a provident loan one Christmas. Spent all year paying it back so couldn’t save and needed another one and so on. I couldn’t get a credit card or any other form of credit. The poorest people have few options in that regard. At least klarna is interest free. But it does tempt people into spending more than they can afford.

But the lure of a take away is that it deletes that mental load of having to go to the supermarket and choose something / cook something, even if it’s literally just bunging it in a microwave. It’s the treat factor of ordering and just waiting for it to magically appear, ready to eat. Of course there are cheaper ways of having a treat but it’s not the same, that’s why take aways are so popular.