A BIG buy now pay later firm has collapsed into administration.
The UK arm of Laybuy, which has a customer base of around 300,000, has appointed administrators at FTI Consulting LLP.
Laybuy offers a “buy now, pay later” alternative to credit cards.
This allows customers to spread payments over six weekly installments.
However, Laybuy is currently no longer accepting new transactions.
However, customers should continue making payments as usual if they took out a loan with the business before it collapsed.
The company operates in New Zealand, Australia and the United Kingdom, serving approximately 500,000 users worldwide.
The New Zealand-based firm deactivated its website more than a week ago and on June 17, Laybuy Group Holdings Limited was placed into receivership.
Receivership is initiated by creditors or banks who believe that a business cannot pay its debts.
Now that the UK branch has officially collapsed, its administrators are working closely with receivers Deloitte New Zealand and Deloitte Australia, who are now responsible for running the whole 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, administrators of the parent companies were appointed directors after unsuccessful attempts to secure further investment or sell the business and/or assets.
As a result, it was necessary to place the British company into administration.
However, it is 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 employees, traders and other affected stakeholders during this difficult time.
“Laybuy is currently not accepting new transactions, but customers should continue to make payments as usual.”
“Further information will be available at www.fticonsulting.com/uk/creditors-portal/laybuy-uk in the coming days.”
What is buy now pay later?
Unlike traditional loans such as credit cards, the loans are interest-free.
It does have risks, however, as many providers are unregulated, meaning shoppers don’t get the same level of protection as 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 installments over six weeks.
But since BNPL’s products are not regulated, users are not currently afforded the same protections as other credit agreements.
For example, banks must make sure they are not lending customers more money than they can afford by reviewing their credit history and finances.
But BNPL providers are not required to carry out such strict checks, although some firms such as Klarna have implemented such checks voluntarily.
Customers of regulated financial companies are also protected by the Financial Ombudsman Service (FOS), which resolves disputes.
However, BNPL users cannot currently submit their claims to the FOS if they believe they have been treated unfairly.
One of the biggest BNPL firms told The Sun that it had asked the FOS many times if it could be a voluntary member but had been turned down on the grounds that it was to be regulated.
It comes after The Sun exclusively reported in April that the firm had removed some retailers from its systems.
Popular brands such as Amazon, eBay, M&S, Homebase, B&Q and Etsy have been removed from the app, prompting a backlash from angry customers.
Customers can usually pay with Laybuy in two ways.
One is directly at the retailer, where you shop online as usual and then select Laybuy as a payment option at checkout.
Alternatively, customers can access certain brands through the app and when they go to checkout, Laybuy will fill in all the payment information.
OTHER BUY NOW, PAY LATER NEWS
Beleaguered plans to regulate BNPL’s products have been repeatedly delayed since the government first announced them in 2021.
The plans have dragged on for so long that the two top policy advisers who have so far drafted the framework have now both left the Treasury, The Sun has learned.
Many insiders involved in discussions with both the government and Labor say that regardless of who picks up the baton in July, implementation of the rules is still more than a year away.
It comes after we revealed in January that the government had put the plans on the back burner until after the election over fears the rules could cause BNPL to cut UK products during the cost of living crisis, which Chancellor Jeremy Hunt later confirmed on ITV .
Labor is understood to be planning to tackle the regulation of BNPL as quickly as possible if it is elected in July.
However, even if the policy were to be worked on from the first day of government, which insiders say is “unlikely”, it would take at least another year before any new rules come into effect.
This is because while the Treasury is responsible for drafting any new legislation, the City’s watchdog, the Financial Conduct Authority (FCA), would be responsible for product regulation.
So once the plans are finally approved by Parliament, the FCA will still need to make regulations and consult with the BNPL industry.
It will then have to give companies time to make any changes.