A BIG purchase now, pay later company has ended up in 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 allows customers to spread their payments over six-week terms.
However, Laybuy is currently no longer accepting new transactions.
But customers should be able to continue paying normally if they had taken out credit before the company’s collapse.
The company has offices in New Zealand, Australia and Great Britain and serves approximately 500,000 users worldwide.
The New Zealand-based company disabled its website over a week ago and on June 17, Laybuy Group Holdings Limited was placed into receivership.
Receivership is instituted by creditors or banks who believe that the company cannot pay its debts.
Now that the UK arm has officially collapsed, its administrators are working closely with the administrators of Deloitte New Zealand and Deloitte Australia, who are now responsible for running the entire business.
Laybuy put itself up for sale in April and reportedly planned to delist from the New Zealand junior stock exchange.
Earlier this month, the administrators were appointed by the directors of the parent companies after failed attempts to raise additional investment or sell the company and/or assets.
As a result, it became necessary to put the British company into receivership.
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 businesses and supporting employees, traders and other affected stakeholders through this difficult period.
“Laybuy is currently not accepting new transactions, but customers should continue to pay as normal.”
“Further information will be made available in the coming days at www.fticonsulting.com/uk/creditors-portal/laybuy-uk.”
What is buy now, pay later?
Unlike traditional loans, such as credit cards, buy now, pay later loans are interest-free.
But it does come with risks because many providers are unregulated, meaning consumers don’t 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 certain period of time, interest-free.
For example, Klarna offers the ‘Pay in Three’ product, where customers can pay for a purchase in three interest-free monthly installments.
Clearpay customers can pay in four interest-free installments spread over six weeks.
But because BNPL products are unregulated, users are not currently covered by the same protections as other credit agreements.
For example, banks must ensure that they do not lend more money to customers than they can afford by examining their credit history and finances.
But BNPL providers are not required to implement such strict checks, although some companies such as 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 are currently unable to submit their claims to the FOS if they believe they have been treated unfairly.
One of the largest BNPL firms told The Sun that it has asked the FOS several times if it could be a voluntary member, but has been refused on the grounds that it would be regulated.
It comes after The Sun exclusively reported in April that the company had removed certain retailers from its systems.
Popular brands such as Amazon, eBay, M&S, Homebase, B&Q and Etsy were removed from the app, causing a backlash from angry customers.
There are usually two ways customers can pay with Laybuy.
One is directly with a retailer, where you shop online as normal and then select Laybuy as the payment option at checkout.
Alternatively, customers can access select brands through the app and when they go to the checkout, Laybuy fills 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 been so long in the making that the two senior policy advisers who drafted the framework so far have both now left the Treasury, The Sun has learned.
Multiple insiders involved in talks with both the government and the Labor Party say that regardless of who takes over in July, it will still be more than a year before the rules are implemented.
It comes after we revealed in January that the government had sidelined the plans until after the election over concerns that the rules could lead to BNPL companies axing their products in Britain during a cost-of-living crisis, which Chancellor Jeremy Hunt later confirmed on ITV.
It is understood Labor intends to tackle BNPL regulations as quickly as possible if elected in July.
But even if work on the policy were to start from the first day of government, which insiders say is “unlikely”, it would take at least a year for new rules to come into effect.
This is because while the Treasury is responsible for drafting new legislation, the city’s watchdog, the Financial Conduct Authority (FCA), would be responsible for regulating the products.
So once the plans are finally approved by Parliament, the FCA will still have to draw up the regulations and consult with the BNPL sector.
It will then have to give companies time to implement any changes.