OUT OF CREDIT
Major buy now pay later firm ‘on edge of going bust’ as it suspends payments for thousands of customers
Plus we reveal further buy now, pay later news
A MAJOR buy now, pay later firm is at risk of collapsing as it suspends payments for thousands of customers.
Lender Laybuy is said to be teetering on the brink of going bust after failing to find a buyer.
1
Customers use the service to buy goods online and in shops, and then pay off their purchases in six weekly instalments.
The New Zealand-based firm, which once boasted around 766,000 customers, has disabled its website and could now be placed into receivership in the coming days, .
Receivership is initiated by creditors or banks that believe the business cannot pay its debts.
Unlike in administration, directors cannot place their own company into receivership.
READ MORE IN MONEY
Laybuy put itself up for sale back in April and was reportedly looking to delist from New Zealand’s junior stock exchange.
Although it's possible that the company could still be sold.
All of its payment products have been unavailable to users since Wednesday.
The operator has told merchants using its service its payment offering is currently suspended.
Most read in Money
The company sent out a notice today stating: "Laybuy’s services are currently suspended, including all payment options."
Customers have been taking to social media to complain that they can't receive or make any payments.
Major bank axes BNPL payment method
Writing on X, formerly known as Twitter, one said: "Anyone know what's going on with Laybuy? Are they about to fold?"
Another wrote: "Have you seen anything about Laybuy?
"Seems lots of small businesses are having issues and it seems like trouble is on the horizon."
One shared an email they were sent by the company which stated: "Laybuy's services are currently suspended, including all payment options. We don't currently have a resolution timeframe but will ensure you are immediately notified."
What is buy now, pay later?
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.
Klarna lets shoppers pay for items in full up to 30 days later or split it into three interest-free instalments.
Clearpay customers can pay in four interest-free instalments over six weeks.
Meanwhile, Laybuy lets its customers spread the cost over six weekly payments.
Laybuy has declined to comment on this story. Sun Money has asked how customers expecting payments to leave accounts will be affected and will update when we hear back.
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.
One said on review site Trustpilot this week: “I used to use Layby all the time to buy off Amazon on eBay [sic].
"Now they've removed these stores from their app, it's absolutely no use to me anymore.
“I have moved on to another app that I can use eBay and Amazon. It's a shame because I really like Laybuy, but all good things must come to an end your stores have no interest to me.”
Another added: "I used to buy things from Amazon and eBay as you could spread the cost but they aren’t there anymore.
"Also last weekend Marks & Spencer were there and then disappeared too. Please please sort this out!"
A third said: “Really disappointed that I can’t use the stores I use.
“Can you let me know when this will be up and running? Really annoying.”
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.
OTHER BUY NOW, PAY LATER NEWS
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, it is actually the City watchdog, the Financial Conduct Authority (FCA), which 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.
What is buy now, pay later and why does it need to be regulated?
BNPL 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.
Around 10.1million people in the UK used BNPL in 2022-2023, according to the Money and Pensions Service.
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.
READ MORE SUN STORIES
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.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Facebook group to share your tips and stories
Topics