The State of New York pushed through a budget bill that includes a first step at regulating Buy Now, Pay Later (BNPL) in a way that fails to understand how these products actually work, pushing consumers towards high-cost credit cards instead of the intended safeguarding their financial well-being. For years, Klarna has been calling for proportionate and outcomes-based regulation of BNPL. However, this announcement is a missed opportunity to lead with forward-thinking regulation tailored to today’s financial tools.

“A square peg in a round hole”

The State had a chance to set a thoughtful example with a progressive BNPL regulation, but instead, it chose a broad-brush approach that risks stifling innovation and diminishing consumer choice by trying to fit BNPL products into existing, 57 year old credit card rules.

The current language demonstrates a basic misconception about BNPL products - even as BNPL has provided millions of American consumers with a highly transparent, short-term repayment solution that encourages responsible spending.

At Klarna, we perform strict eligibility assessments and underwrite each and every transaction. The strength of our underwriting is reflected in our 1% default rate globally. That’s why we need a bespoke framework that provides robust consumer protection while still allowing space for innovation and consumer choice.

A missed opportunity for financial inclusion

Instead of creating a modern framework, the bill risks limiting access to low-cost credit for New York consumers and businesses. It could ultimately drive more people back toward revolving credit cards - products that charge compound interest on unpaid balances, often include a range of fees and encourage revolving debt. These legacy credit models are a key contributor to the $1+ trillion in consumer credit card debt Americans face today.

Klarna’s BNPL is simple: it’s short-term, interest-free credit with no fees when paid on time. By doing so, we saved U.S. consumers over $2 billion in saved interest over five years compared to if they would have used their average credit card instead. That’s what responsible, transparent credit can look like.

Our commitment

We’re committed to working with New York lawmakers and the Department of Financial Services on regulation that reflects how BNPL actually works. Consumers deserve protection - without losing access to flexible, low-cost credit.