Klarna Docs - Regulated Financing Guidelines

Regulated Financing Guidelines

If you advertise retail credit options which are regulated by the FCA, we recommend that you seek independent legal advice when undertaking any advertising. Using a non-compliant advert can result in enforcement action including fines and the withdrawal of your authorised status from the FCA. Klarna does not accept any liability  to Klarna merchants or other third parties for the information contained in this guide. Please keep up to date on the latest updates and changes to the regulations from  the relevant authorities, as the information provided in this guide may change.

Klarna’s financing products are regulated credit agreements. Financing falls into two categories, fixed sum credit and revolving credit (also known as running account credit).

Fixed sum credit is a regulated credit agreement with a fixed duration (term). Klarna offers fixed sum credit agreements from 6 months to 4 years. Fixed sum credit can be offered on interest-free or interest- bearing amounts and may incur a default fee if a repayment is missed

Revolving credit is a regulated credit agreement with no fixed duration. This allows consumers to use their account on a rolling basis up to an agreed limit. Revolving credit can be offered with different interest
rates (possibly at 0%) and may include a promotional period for a set period of time. Once this time has passed, if the consumer has not made sufficient repayments over the set period of time the promotion period is offered, any promotional interest rate will revert to Klarna’s standard rate of interest Klarna Financing is a fully-regulated credit product.

This guide has been designed to help you understand the legal requirements when promoting or communicating finance options for consumers.

This guide primarily contains information relevant to our regulated Financing products which are regulated credit agreements (“Financing Products”).

Do you need FCA authorisation as a credit broker?

If you offer our Financing products in the UK, you must obtain a credit broker license from the Financial

Conduct Authority (FCA). A credit broker is a person who carries out certain activities by way of business

in the UK, the most relevant of which are:

  • Effecting introductions relating to credit agreements
  • Presenting or offering an agreement that would, if entered into, be a regulated agreement
  • Assisting with preparatory work relating to entering into a regulated credit agreement
  • Entering into a regulated credit agreement on behalf of a lender.

If you carry out any regulated activities without first being authorised by the FCA then you may be

committing a criminal offence.

If you only offer BNPL Products products then you do not require a credit broker authorisation from the FCA. Any advertisements would, however, need to be approved by Klarna before published to a UK audience.

The rules applicable to advertising in the UK are found in both legislation and in self-regulatory industry codes of practice. The following authorities are responsible for regulating the advertising/financial promotion and communication with a consumer.

The Financial Conduct Authority (FCA).

The main aim of the FCA is to ensure that financial markets function well. In order to achieve this, it has three operational objectives which are to:

  • Secure an appropriate degree of protection for consumers
  • Protect and enhance the integrity of the UK financial system; and
  • Promote effective competition in the interests of consumers

It is committed to ensuring the consumer credit market works well and that customers are treated fairly.

The FCA's Principles for Business (the Principles) and Consumer Credit Sourcebook (CONC) govern financial promotions issued, distributed or communicated by authorised credit broking firms to consumers.

The Advertising Standards Authority (ASA).

The ASA is the UK’s advertising regulator and is responsible for applying the Advertising Codes (the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing and the UK Code of Broadcast Advertising) written by the Committee of Advertising Practice (CAP) and Broadcast Committee of Advertising Practice (BCAP). These apply to all UK firms.

ASA PowersFCA Powers
The ASA considers all complaints about non-technical aspects of advertisements in non-broadcast media. For example, offence, social responsibility, fear and distress and competitor denigration. The ASA also assesses complaints about broadcast advertisements and liaises with the FCA on technical matters, as appropriate. The ASA investigates general advertisingcomplaints and can:
  • Require changes to advertising or ban advertising
  • Publish findings and decisions on the ASA website
  • Refer financial advertising to the FCA
  • Refer a complaint to Trading Standards, who have a broader range of enforcement powers available to them. Trading Standards can, for example, take legal action resulting in possible (unlimited) fines and/or imprisonment
  • Liaise with the Competition & Markets Authority (CMA) in respect of an issue
The FCA monitors and investigates compliance with the Principles, CONC and its other rules generally and has a variety of powers, including swift direct intervention with firms to force the immediate amendment or withdrawal of financial promotions which contravene its financial promotion rules under section 137S of the FSMA. The FCA also has the power to, amongst other things:
  • Ban financial promotions
  • Issue fines and public censure
  • Take legal action which may result in fines or imprisonment; and
  • Vary or remove FCA permissions

As the FCA does not pre-approve promotions, it is incumbent on senior management of those firms making such promotions to make sure they remain compliant.

Other guidelines that apply to financial promotions.

Financial promotions are subject to a variety of laws and rules, some of which we consider in this guide alongside the detailed CONC requirements, which may include:

  • Consumer Protection from Unfair Trading Regulations 2008 – set out the commercial practices, of which advertising is one
  • Business Protection from Misleading Marketing Regulations 2008
  • Consumer Rights Act 2015