A MAJOR buy now, pay later firm has collapsed into administration.
Laybuy’s UK arm, which has a customer base of around 300,000, has appointed administrators at FTI Consulting LLP.
Laybuy offers a “buy now, pay later” service alternative to credit cards.
This enables customers to spread payments across six-week instalments.
However, Laybuy is no longer currently accepting new transactions.
But customers should continue to make payments as normal if they took out credit with the firm before its collapse.
The firm has operations across New Zealand, Australia, and the UK and services approximately 500,000 users globally.
The New Zealand-based firm disabled its website over one week ago, and on June 17, Laybuy Group Holdings Limited was placed into receivership.
Receivership is initiated by creditors or banks that believe the business cannot pay its debts.
Now that the UK arm has officially collapsed, its administrators are working closely with the receivers of Deloitte New Zealand and Deloitte Australia, who are now responsible for managing the entire company.
Laybuy put itself up for sale back in April and was reportedly looking to delist from New Zealand’s junior stock exchange.
Earlier this month, the receivers were appointed by the parent companies’ directors following unsuccessful efforts to secure additional investment or sell the business and/or assets.
As a result, it became necessary to place the UK company into administration.
However, it’s important to note that the company could still be sold in the future.
Sam Ballinger, one of the Joint Administrators, said: “The joint administrators are currently assessing the options available to the companies and supporting the employees, merchants and other affected stakeholders through this difficult period.
“Laybuy is not currently accepting new transactions, however, customers should continue to make payments as normal.”
“Further information will be made available at www.fticonsulting.com/uk/creditors-portal/laybuy-uk in the coming days.”
UNLIKE traditional borrowing, such as credit cards, buy now, pay later loans are interest-free.
But it does have risks, as many providers are unregulated, which means shoppers do not get the same level of protection as with other forms of credit.
Klarna, Clearpay and Laybuy are the main providers.
These products allow consumers to spread the cost of purchases over a set time frame interest-free.
For example, Klarna offers a “Pay in Three” product, where customers can pay for a purchase in three interest-free monthly payments.
Clearpay customers can pay in four interest-free instalments over six weeks.
But because BNPL products aren’t regulated, users aren’t currently covered by the same protections as with other credit agreements.
Banks, for example, must ensure they aren’t lending more money to customers than they can afford by reviewing their credit history and finances.
But BNPL providers aren’t required to carry out such stringent checks, although some firms like Klarna have introduced these checks voluntarily.
Customers of regulated financial firms are also protected by the Financial Ombudsman Service (FOS), which resolves disputes.
But BNPL users can’t currently take their claims to the FOS if they think they’ve been treated unfairly.
One of the biggest BNPL firms told The Sun it has asked the FOS numerous times if it can be a voluntary member, but has been refused on the basis that it’s due to be regulated.
It comes after The Sun exclusively reported back in April that the firm had removed certain retailers from its systems.
Popular brands like Amazon, eBay, M&S, Homebase, B&Q and Etsy were removed from the app, causing a backlash from angry customers.
There are two ways customers can usually pay with Laybuy.
One is directly with a retailer, where you shop as normal online and then select Laybuy as a payment option at the checkout.
Alternatively, customers can access certain brands through the app and when they go to the checkout Laybuy will fill in all the payment details.
Beleaguered plans to regulate BNPL products have been repeatedly postponed since the Government first announced them in 2021.
The plans have dragged on for so long that the two senior policy advisers who drafted the framework so far have now both left the Treasury, The Sun has learned.
Multiple insiders involved in discussions with both the Government and the Labour Party say that no matter who picks up the baton in July, the rules are still more than a year away from being implemented.
It comes after we revealed in January that the Government had sidelined the plans until after the election over concerns the rules could cause BNPL firms to axe their products in the UK during a cost of living crisis, which Chancellor Jeremy Hunt later confirmed on ITV.
It is understood Labour plans to address BNPL regulation as quickly as possible if it is elected in July.
However, even if work began on the policy from day one of government, which insiders say is “unlikely”, it would take at least another year for any new rules to come into effect.
This is because while the Treasury is responsible for drafting any new legislation, the City watchdog, the Financial Conduct Authority (FCA), would be responsible for regulating the products.
So, once the plans are finally legislated through parliament, the FCA will still have to create the regulations and run a consultation with the BNPL industry.
It will then need to give firms time to implement any changes.
