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Major buy now pay later firm with 300,000 users collapses into administration
Here's what it means for you
A MAJOR buy now, pay later firm with 300,000 users has collapsed into administration.
Laybuy has appointed administrators in the UK days after suspending payments.
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Laybuy offers a "buy now, pay later" service alternative to credit cards.
This enables customers to spread payments for items bought online and in shops across six-week instalments.
Laybuy is no longer accepting new transactions but customers have now been told by administrators FTI consulting they should continue to make payments as normal if they took out credit with the firm before its collapse.
The firm operates across New Zealand, Australia, and the UK with 500,000 users globally. Around 300,000 of them are in the UK.
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The New Zealand-based firm disabled its website in mid-June.
Shortly after the business down under was placed into receivership after failing to find a buyer or additional investment to keep it afloat.
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.
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Now the UK part of the business has been placed into administration
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Administration is when all control of a company is passed to an appointed to a licensed insolvency practitioner.
It doesn’t necessarily mean the end of the business though.
All or parts of the business could still be sold if an interested buyer is found.
Administrators will try to help a company find ways to repay debts or solve its cashflow problems.
The process can last anywhere from a few weeks to up to a year or more.
But if the administration process can't rescue the company or find a new owner, this can lead to liquidation.
Liquidation is the process of selling all assets and then dissolving the company completely.
Sam Ballinger, joint administrator at FTI Consulting, 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."
Even when a company falls into administration, customers are still bound by the firm's standard debt collection process if a payment is missed.
Administration doesn't affect the repayment terms of your credit, debt charity Stepchange says.
FTI said that further updates including those affecting customers will be shared in the coming days at www.fticonsulting.com/uk/creditors-portal/laybuy-uk.
Aound 10,500 shops and businesses let shoppers pay with Laybuy, around 2,600 in the UK.
It's understood Laybuy has 29 employees in the UK.
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.
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 could usually pay with Laybuy.
One is directly with a retailer, where you could shop as normal online and then select Laybuy as a payment option at the checkout.
Alternatively, customers could access certain brands through the app and when they go to the checkout Laybuy filled 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, the City watchdog, the Financial Conduct Authority (FCA), would be responsible for regulating the products.
READ MORE SUN STORIES
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.
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