Background
Two issues were investigated, one of which was Not upheld. The other was informally resolved after the advertisers agreed to amend their advertising.
Ad description
A paid-for Instagram post, from the fashion blogger, style_mum, posted on 18 October 2018, stated "... Love love love this dress by @finerylondon If you want a treat but pay day is a couple of weeks away you can now use @klarna.uk which gives you 14 days to pay for your new purchase! Winning ...".
The ad was re-posted by Klarna Bank on their Instagram page, also on 18 October 2018.
Issue
The complainant challenged whether the ad was irresponsible, because they believed it trivialised using a payday loan to make non-essential purchases and encouraged irresponsible spending.
Response
Klarna UK Ltd explained that their 'pay later' product was not a loan or a 'high-cost short-term credit' product (such as a payday loan) and had not been advertised by them as such. It was a service that allowed consumers to defer payment of their purchases from certain retailers for a period of 14 or 30 days. It was an exempt product under the consumer credit regulations, because Klarna did not charge any interest or fees if payment was made within the agreed deferred payment period. If a customer did not pay within the agreed deferred payment period, Klarna would remind them that their payment was late. If they did not receive payment within 120 days, they would advise the credit bureau of non-payment by the customer.
Finery London, the brand featured in the post, explained that the text had been written by their editorial team. They said Klarna operated a system that allowed consumers to 'buy now, pay later' so that any unwanted items could be returned without having to pay for them upfront. No money was loaned in the process; consumers simply paid for their purchase through Klarna after 14 days (which was also Finery London's returns window) for the items the consumer decided to keep. They confirmed that the dress featured in the post cost £89.
Pascale Banks reiterated the comments made by Finery London.
Assessment
Not upheld
The ASA noted that Klarna operated a deferred payment service whereby consumers could purchase items from a selection of retailers and pay for them either 14 or 30 days later. We understood that the service was not a loan or credit card facility, because no interest or fees were payable and the product was therefore exempt from the Consumer Credit Act 1974 and associated regulations.
We noted that the ad referred to the dress, which we understood cost £89, as a "treat" and that it stated "If you want a treat but payday is a couple of weeks away you can now use @klarna.uk which gives you 14 days to pay for your new purchase! Winning ...". We considered in that context, consumers would understand that the service could be used to pay for non-essential purchases in situations where they were in the middle of the month and could not afford them at that time.
We did not consider that it was inherently irresponsible to suggest that a non-essential purchase could be paid for on credit, provided that the product was promoted in a responsible and non-trivialised way.
We considered that the cost of the dress was not so high that it would not be possible to pay for it out of next month's pay for most people, and that consumers would not consider the ad to be suggesting that the purchase should be made impulsively or without proper consideration as to whether they could pay for it when the payment became due. We noted that the ad made clear that consumers would have to pay for the item within 14 days and implied they should be able to do so once they had been paid. We therefore considered the overall message was that the service could be used to manage a consumer’s cash flow rather than encourage them to purchase items they would not otherwise be able to afford.
For those reasons, we concluded that the ad was not irresponsible.
We investigated the ad under CAP Code (Edition 12) rule 1.3 1.3 Marketing communications must be prepared with a sense of responsibility to consumers and to society. (Social responsibility), but did not find it in breach.
Action
No further action necessary.
