Thousands of shoppers who tried to pre-order Microsoft’s latest Xbox are left fearful for the state of their credit scores after a mess between high-street retailers and ‘buy now, pay later’ service Klarna left them without a console but with marks on their credit files. .
Klarna—branded as No Drama, Just Klarna—has partnered with GAME and Smyths Toys to allow customers to purchase new Xbox Series S and X game consoles as part of an “All Access” package.
These gave an option to spread the cost over two years, provided customers set up a direct debit and pass a “hard” credit check – which appears publicly on borrowers’ credit reports.
But consumers reported that the retailers’ websites had been down for up to six hours when the deal was launched on Tuesday, and that when they finally managed to get to the checkout, they were greeted with a message telling them “there was a technical error.” After GAME and Smyths are out of stock.
Klarna has partnered with GAME and Smyths Toys to allow people to pre-order a new Xbox and pay for it over 24 months. But shoppers report several problems on both sites
The farce and subsequent Twitter backlash led to Microsoft itself getting involved, with Xbox UK’s head of marketing telling customers on the social media platform that they had spoken to Klarna and retailers to try to fix the situation.
Despite not being able to purchase an Xbox — due out in November — shoppers still went through Klarna’s affordability checks and even received emails telling them they’d set up a direct discount with the Swedish company.
A number of shoppers who get the error message have tried to refresh websites multiple times or try to order again, though Klarna insists this should result in nothing more than a hard credit check.
But some users on the social media platform Twitter, where evidence of the problems for GAME, Klarna and Smyths Toys first emerged, reported that they had multiple buy now, pay later checks on their files.
While direct debit does not affect people’s credit scores, several hard searches in a short period of time can damage them as lenders can see it as a sign of desperation or financial stress, as borrowers frantically apply for credit.
The potential impact on their credit score due to what one Twitter user, Dan Jenkins, described as a ‘hard-for-nothing check’, has led some to fear they’ll be rejected if they try to order the console again.
Klarna, which recently became Europe’s most valuable £8 billion fintech company, offers three ways to pay for items in installments or after you order them, but only the official payment plan offered for those trying to pre-order the new Xbox requires an official credit check. .
Its lending practices and suggestion it mostly encourages young people to spend money they don’t have has come under scrutiny over the past 24 months, with the Financial Conduct Authority set to investigate ‘buy now, pay later’ lenders as part of a wider inquiry into unsecured credit. .
Many shoppers who have been greeted with technical problems have repeatedly tried to re-order a console, though this likely left them applying for credit with Klarna multiple times.
“Hundreds and hundreds of people have had a credit check done”
One shopper caught up in the problems with Klarna and Smyths Toys was Will Holmes, 36, of Tyne and Wear.
There are options to buy the console outright, he told This is Money, but it appears that GAME and Smyths let Klarna handle the financial side of the deal.
“The thing that makes the deal so attractive to the consumer is that the total cost after two years is actually less than what you’d pay for the sum of the parts.” The two different Xbox models were available for either £20.99 or £28.99 per month.
“The site had been down all day for this package they call Xbox All Access,” he said, “When it finally showed up six hours after it went down, it let you push your order to the point where Klarna did a credit check and set up a direct debit for you.
Shoppers report receiving emails telling them they have direct discounts with Klarna, despite not being able to order an Xbox console. They are later told that these direct debts will be voided
“Then you realize they don’t have inventory, but you still have a direct debit agreement set up in your name and you have a confirmation email that says so.”
He added, ‘It appears that a credit check was carried out in preparation for the available stock, but when the deal was trying to complete a lack of stock prevented its successful completion, at which point a direct debit appears to have been set up and a credit run achieved.
“Without a doubt, despite a credit check on hundreds and hundreds of people who do not have stock to meet their demands which will inevitably affect their credit rating.”
Customers were unable to complete orders as retailers were out of stock, despite being subjected to credit checks by Klarna that appeared on credit files
He received another email from Smyths Toys late Tuesday telling him that those who set up a direct discount with Klarna would be able to order a console and not be subject to any further credit checks if they completed their pre-order within six days.
He said he was happy with the outcome and that “things were quickly set straight”, but the farce appears to have forced Microsoft itself to intervene.
“We spoke to all retailers and Klarna last night to help resolve the issues,” Xbox UK Chief Marketing Officer Samuel Bateman tweeted on Wednesday morning.
He previously said Tuesday night that Microsoft is working to resolve the situation “for customers who have proof that their order has been accepted but have not yet received an email confirmation from GAME or Smyths.”
Shoppers on Twitter reported that hard credit checks from Klarna appeared on their credit file. Some even said they were checked multiple times
One Twitter user, Ross Irving, responded, “I’ve been in touch with the Smyths as they asked, but I have absolutely nothing back just yet. Really frustrating situation, as I can’t order elsewhere if it really does. Much forgotten.
Credit reference agency Experian urged those concerned about damage to their credit score due to an improperly recorded “hard” check to contact Klarna and get them to remove it.
She said a single credit request should not result in more than one hard search showing up on a credit report, and again encouraged people to bring this up with Klarna.
What did the companies say?
THIS MONEY could not reach out to GAME or Smyths Toys for comment, but in a statement posted on their website Wednesday, Klarna’s Alex Marsh wrote: ‘The pre-order window opened yesterday for the latest Xbox and there was huge demand from thousands of gamers eager to book in. their console.
We at Klarna offer the financing solution for the Xbox All Access bundle available from GAME and Smyths Toys through our financing product.
Over the course of the day, we have processed thousands of successful orders. Unfortunately, the high demand meant that some consumers had some problems with their orders.
Xbox UK’s head of marketing stepped in after the social media backlash, telling a customer that Xbox had spoken to GAME, Klarna and Smyths to try and resolve the issues.
A number of consumers have been approved for financing but have not been able to complete their orders on the retailers website.
This happened because, in response to high demand, retailers ran out of stock and had to close online orders while consumers were part of the checkout process or just completed their credit applications.
“We would like to reassure consumers who have received notification that they have set up a direct discount but were unable to place their order that we are working with our retailers to ensure a satisfactory outcome for these consumers.
In addition, some consumers have expressed concerns about the impact on their credit scores, when they submitted multiple applications due to issues with the website.
When a customer applies for our financing products, Klarna performs a difficult credit check that can affect your credit score and be visible to other lenders.
If another application is submitted, no further hard checks are made to provide the same customer details. In some cases, customers saw additional quotes or simple searches.
These are not visible to any other lender, only to yourself, and do not affect your credit score.
We realize this has been a frustrating experience for many of our customers. Please be assured that we are working hard with our retailers and deeply regret any inconvenience or inconvenience this may have caused.
“If any of our customers are interested, we encourage them to contact our customer service teams.”
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