Confusion over Klarna direct debits after shoppers miss out on new Xbox pre-orders

The pre-order window for the Xbox All Access bundle opened on Tuesday (22 September), with shoppers in the UK able to place orders through Game or Smyths Toys and pay by taking out a credit agreement with Klarna. But high demand for the bundle, which offers a new Xbox Series X or Xbox Series S console plus 24 months of gaming subscription service Xbox Game Pass Ultimate, meant some customers couldn't complete their orders.

Now many are reporting getting emails from Klarna saying a direct debit has been set up to pay for their order, even though they weren't able to complete it or haven't received confirmation that it was successful. And some are concerned about their credit score, as those who apply for Klarna financing are subject to hard credit checks and some will have been credit-checked even though they ended up being told there was no stock.

Klarna has apologised to customers and insists no one will be left paying for an item they haven't managed to purchase – it says it's working with retailers to "ensure a satisfactory outcome" for those affected.

Update 9pm Wednesday 23 September: This story has been updated, as Klarna has corrected some of the information it originally gave us – it now says affected customers don't yet have a credit agreement in place, as this does not happen until goods are shipped, and that while customers have been told direct debits have been set up, none have actually been set up so far. We're continuing to follow the story and will update it if we get new info.

For more help on your rights and protection when buying online, see our Consumer Rights guide.

'Am I going to have money taken for nothing?'

Klarna says the issue arose when retailers had to abruptly turn off online ordering of the consoles, because their stocks had been used up. At the time, some shoppers were partway through their Klarna credit applications – meaning that by the time they had applied for a credit agreement, they were no longer able to complete their orders.

Klarna hasn't been able to tell us how many people have been affected by the issue, but in the last 24 hours we've seen at least 25 reports on social media from people who say they had a problem ordering and are confused about whether they'll be charged or left with a mark on their credit file. Here are a few:

How does Klarna work? 

Klarna is best known for providing buy-now-pay-later finance, where customers make a purchase and then pay for it either 30 days later or through short-term instalments. For more on this, see What is buy now, pay later?

But in this case, customers pre-ordering the Xbox All Access bundle were taking out Klarna's financing option, which works differently.

If you sign up to Klarna's financing then you're taking out a credit agreement, which works a bit like a credit card, and you pay off the amount borrowed by monthly direct debit over a certain period. In this case, customers pay over 24 months, and have access to Xbox's Game Pass Ultimate during this time (in addition to getting a new Xbox console).

Unlike with Klarna's buy-now-pay-later products, with financing there can sometimes be an associated interest rate, but it depends on the product and retailer, and in this case the financing offered was at 0% interest. Crucially, you'll also undergo a hard credit check – one which is recorded on your file and is visible to other lenders – before you can take out a credit agreement.

What will happen if my Xbox order didn't go through?

If you've been told you've had a direct debit set up, Klarna says you'll either receive the Xbox bundle or the direct debit will be cancelled. Klarna insists no one will be left paying for a product they didn't receive.

It originally told us that some customers had had direct debits set up, but it's since clarified that these were direct debit mandates, which are set up during the application process, rather than actual direct debits. These mandates will be cancelled if you weren't able to complete your order.

Klarna says affected customers will fall into one of three scenarios, and has released new information about what the next steps will be depending on your situation. It says: 

• If you've received a confirmation email from the retailer, a purchase confirmation AND a direct debit confirmation from Klarna, you don't need to do anything. If you've been sent all three of these emails, Klarna says you'll receive your Xbox for the November launch as planned. 

• If you've received a direct debit confirmation email from Klarna but you HAVEN'T received a confirmation email from the retailer or a purchase confirmation from Klarna, the situation's more complicated. Unfortunately, a confirmation of a direct debit on its own doesn't mean you're approved and will receive an Xbox - your situation will depend on whether you were accepted or declined for Klarna's financing product. 

  If you were accepted for financing, you should get an email from the retailer by 2 October telling you a console's been allocated for you. You'll need to pre-order the console again through the retailer and re-apply for Klarna financing - but Klarna says if you apply with the same details, there won't be any impact on your credit score from re-applying and a direct debit will have already been set up, which can be re-used. 

   If you were declined for financing, you should get an email from the retailer by 2 October letting you know how you can buy a console if you want to. But you don't need to do anything else as no Klarna financing will have been set up and no money will be taken from your account. Klarna says it will cancel any direct debit mandate that's been set up, but you can also cancel it yourself through your bank if you would like it to be cancelled sooner. 

• If you made your order through Smyths Toys and had email confirmations but were later told your order had been cancelled, you WILL get your Xbox. Klarna says that some customers who ordered through Smyths were sent emails from both Smyths and Klarna confirming they'd made a successful purchase, but were later sent emails from Smyths saying the order had been cancelled, and from Klarna saying the financial agreement had been terminated.

  However Klarna says this was a mistake from Smyths Toys, and affected customers will get their Xboxes. If this happened to you, it says you should have already been contacted by Smyths Toys with details of how to get your console.  

Some customers have also been left worried about the impact on their credit score if their application wasn't successful or if they made multiple applications while trying to order their Xbox.

This is because Klarna performs a hard credit check when it receives applications for its financing products – which is visible to other lenders on your file. (For more on what this can mean, see our Credit Scores guide.)

Klarna says it's reviewing every application for Xbox All Access made since 22 September, and that it will work with credit reference agencies to have any marks removed from credit files if they shouldn't be there. If you're worried, you can contact Klarna directly by using its in-app chat, calling 0808 189 3333 or emailing customer@klarna.co.uk. 

What does Klarna say?

A statement from Klarna's UK lead Alex Marsh, posted on its website, says: "We recognise this has been a frustrating experience for many of our consumers. Please rest assured that we are working hard with our retailers and we are extremely sorry for any inconvenience or distress this may have caused. If any of our customers are concerned, we encourage them to please contact our customer service teams."

We've contacted Game and Smyths Toys, and will update this story when we hear back.