Dear Ranking Member Warren and Senators Duckworth, Booker, Blumenthal, and Hirono:
Thank you for your letter and for your attention to the role that Buy Now, Pay Later (BNPL) products play in the financial lives of Americans. We share your commitment to protecting consumers and welcome the opportunity to demonstrate how Klarna’s products are transparent, responsibly designed, and offer a safer alternative to high-cost revolving debt. We appreciate your focus on issues such as affordability, credit reporting, and risks of overextension, and we welcome the opportunity to address each of these concerns directly.
When we entered the U.S. in 2019, our mission was clear: make payments more secure, transparent, and low-cost for consumers who had long been underserved by traditional credit. For decades, the dominant option, revolving credit cards, has generated more than $130 billion in interest each year on $1.2 trillion in outstanding balances, with nearly half of cardholders carrying debt month-to-month.
Klarna’s interest-free BNPL products offer a fundamentally different model: short-term, structured payments with no interest, no revolving debt, and strong guardrails to prevent overextension. Today, 28 million Americans choose Klarna as a better alternative to high-cost revolving debt, a market-driven shift toward more transparent and consumer-friendly credit.
How Klarna’s products work
Klarna is a global digital bank and flexible payments provider with 114 million active users worldwide in partnership with more than 850,000 merchants. In the U.S., Klarna partners with more than 120,000 retailers, including tens of thousands of small and medium-sized businesses, to give consumers flexibility and transparency at checkout. Klarna offers four ways to pay: Pay in Full, Pay in 30, Pay in 4, and Financing when longer repayment is needed. The first three are interest-free options that together account for 96% of transactions globally.
Across all products, Klarna provides clear, upfront information on total cost, payment schedule, and any applicable fees. Late fees are capped and consumers can pause or reschedule installments at no cost the first time. We also offer dedicated support for customers experiencing financial hardship.
Unlike revolving credit cards, whose business model depends on extended, interest-accumulating balances, Klarna’s products are designed to minimize debt duration and reduce risk. The data reflects this: our customers carry an average balance of $87, compared to $6,250 for the average credit card user.
CFPB report concludes BNPL does not lead to negative consumer outcomes
These strong outcomes are consistent with independent findings. The June 2025 CFPB study - The Effect of BNPL on Consumer Debt and the Ability to Repay Non-BNPL Debt Obligations -, using real transaction-level data from the largest BNPL providers (including Klarna), provides one of the most comprehensive analyses to date of how BNPL fits into U.S. consumers’ financial health.
Key findings:
No increase in overall debt: BNPL use didn’t lead to more borrowing across the board.
No spillover distress: no impact on credit card delinquencies, utilization, or finance charges.
Substitution, not stacking: some users moved away from interest-bearing products opting for healthier interest-free options like BNPL.
Higher repayment rates vs credit cards: BNPL loans were repaid 98% of the time, vs. 10%+ default rates on credit cards.
These findings confirm that BNPL provides consumers with a viable, lower-risk alternative to revolving credit, exactly what we designed it to do.
Responsible underwriting and credit reporting
We recognize concerns about debt accumulation and reporting transparency. In direct contrast to traditional credit card companies, we assess eligibility before every purchase and immediately pause a consumer's access to credit if a payment is missed. Klarna avoids loan stacking through real-time credit assessments, internal debt limits, and data-driven underwriting designed to prevent unsustainable debt accumulation.
The results speak for themselves: more than 99% of our lending is repaid. While most credit card companies write off around 4.2% of their loans, Klarna's rate sits at just 0.4%, ten times lower. That's not a rounding error; it's a reflection of a smarter, more responsible way to lend.
On credit reporting, we support comprehensive reporting that accurately reflects consumers’ financial behavior and strengthens credit scores. However, the current U.S. credit reporting system cannot yet accommodate short-term, interest-free BNPL products without risking unnecessary tradelines for small purchases, inaccurate reporting of returns, and credit file 'noise' that harms scoring models.
Because of these gaps, we do not yet report short-term BNPL to credit reference agencies in the U.S.. We are actively working with the industry and bureaus on frameworks that will allow responsible BNPL use to benefit consumers. We already report long-term financing products to TransUnion and Experian, and in markets where reporting systems are BNPL-ready, such as the U.K., we report all BNPL loans.
BNPL for essential purchases
Your letter raises important questions about consumers using BNPL for essential purchases like groceries. We believe people should pay with money they have whenever possible. But when credit is needed, it's important to choose a smarter, more responsible option. For decades, Americans have relied on credit cards for grocery shopping; 38% of online shoppers prefer them, but this comes at a price. More than half (56%) have paid interest, 42% have faced fees, and 34% have missed payments.
A $200 grocery order should cost exactly that, no hidden credit card fees or interest. With Klarna Pay in 4, shoppers can split payments into four manageable, interest-free installments with no fees if you pay on time, and structured installments that make it easier to manage payments.
Additional consumer protections
Beyond point-of-sale transparency, Klarna provides extensive consumer protections, including:
Direct in-app dispute resolution and return reporting
Automatic payment pausing during merchant disputes
Full reimbursement when merchants fail to deliver or misrepresent products
Klarna assumes merchant risk so consumers never pay for undelivered goods
These protections exceed those available through traditional payment methods and are central to our consumer protection model.
Our commitment
We understand that innovation in consumer finance requires thoughtful oversight and we share your goal of ensuring that every American has access to fair, transparent, and affordable credit options.
Klarna operates as a fully regulated financial services provider in the U.S., adhering to all applicable federal and state regulations. We work in close partnership with state regulators and federal agencies to uphold strong consumer protections and ensure full compliance with all legal requirements. Our products are engineered to be responsible, transparent, and aligned with established supervisory standards.
But we also recognize a broader challenge, one we believe unites us. High-cost, revolving debt continues to impose extraordinary burdens on American consumers.
On this, we believe we all agree: Americans deserve safer, more affordable choices.
We welcome the opportunity to work with you, consumer advocates, regulators, and other stakeholders on a collaborative effort to curb harmful credit practices in the United States. Klarna would gladly participate in a working group or industry task force focused on modernizing consumer credit, improving transparency, and expanding access to low-cost, well-designed financial products, regardless of provider.
There is far more that unites us than divides us, and we are ready to contribute constructively to any initiative aimed at strengthening consumer protections while preserving the kinds of low-cost options that help people avoid revolving debt.
Klarna remains committed to setting the highest standards for safety, transparency, and responsible innovation in the U.S. financial system.
Sincerely,
Sebastian Siemiatkowski
Co-Founder and Chief Executive Officer