A BIG buy now, pay later company with 300,000 users fell into administration.
Laybuy appointed administrators in the UK days after the payments were suspended.
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However, it is important to note that the company could still be sold in the futureCredit: Alamy
Laybuy offers a “buy now, pay later” service as an alternative to credit cards.
This allows users to spread payments for items purchased online and in stores in six-week installments.
Laybuy is no longer accepting new transactions, but administrators at FTI Consulting have told clients they should continue making payments as usual if they took out a loan with the company before it collapsed.
The company operates across New Zealand, Australia and the United Kingdom with 500,000 users worldwide. There are about 300,000 of them in Great Britain.
The New Zealand-based company disabled its website in mid-June.
Shortly after, the company below was placed into bankruptcy after failing to find a buyer or additional investment to sustain itself.
Bankruptcy administration is initiated by creditors or banks who believe that a company cannot pay its debts.
Unlike the board, directors cannot bankrupt their own company.
Now the British part of the business has been put into administration
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Administration is when all control over the company is transferred to an appointed authorized receiver.
However, this does not necessarily mean the end of work.
The business could be sold in whole or in parts if an interested buyer is found.
Administrators will try to help the business find ways to pay off debts or solve cash flow problems.
The process can take anywhere from a few weeks to a year or more.
But if the administrative process cannot save the company or find a new owner, it can lead to liquidation.
Liquidation is the process of selling all assets and then completely dissolving the company.
Sam Ballinger, joint administrator at FTI Consulting, said: “Joint administrators are currently assessing the options available to 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 make payments as usual.”
Even when a business goes into administration, customers are still bound by the standard debt collection process if payment is missed.
The administration does not affect the repayment terms of your loan, says the charity Stepchange.
FTI said further updates, including those affecting clients, will be published in the coming days at www.fticonsulting.com/uk/creditors-portal/laybuy-uk.
Around 10,500 shops and businesses allow customers to pay with Laybuy, around 2,600 in the UK.
Laybuy is understood to have 29 employees in the UK.
What does buy now, pay later mean?
UNLIKE traditional borrowing, such as credit cards, buy-now-pay-later loans are interest-free.
But there is a risk because many providers are unregulated, meaning customers 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 their purchases interest-free over a specific time frame.
For example, Klarna offers the “Pay in Three” product, where customers can pay for purchases in three interest-free monthly installments.
Clearpay customers can pay in four interest-free installments over six weeks.
But since BNPL’s products are not regulated, users are not currently covered by the same protection as with other credit agreements.
Banks, for example, must ensure that they do not lend customers more money than they can afford by reviewing their credit history and finances.
But BNPL service providers are not required to carry out such strict checks, although some companies such as Klarna have voluntarily introduced such checks.
Clients of regulated financial firms are also protected by the Financial Ombudsman Service (FOS), which resolves disputes.
But BNPL customers cannot currently submit their claims to the FOS if they think they have been treated unfairly.
One of BNPL’s biggest companies told The Sun that the FOS had repeatedly asked if it could be a voluntary member but had been turned down on the grounds that it needed to be regulated.
It comes after The Sun exclusively reported in April that the company had removed certain traders from its systems.
Popular brands such as Amazon, eBay, M&S, Homebase, B&Q and Etsy have been removed from the app, sparking a backlash from angry shoppers.
There are two ways that customers can usually pay with Laybuy.
One is direct to the retailer, where you can shop as usual online and then select Laybuy as a payment option at checkout.
Alternatively, customers can access specific brands through the app and fill in all payment information when they go to the Laybuy checkout.
OTHERS BUY NOW PAY LATER NEWS
Beleaguered plans to regulate BNPL products have been repeatedly delayed since the government first announced them in 2021.
The plans have dragged on for so long that the two senior policy advisers who have drawn up the framework so far have both now left the Treasury, the Sun has learned.
Multiple insiders involved in talks with the Government and the Labor Party say that regardless of who takes over 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 shelved the plans until after the election over concerns that the rules could cause BNPL companies to cut their products in the UK during the cost of living crisis, which Chancellor Jeremy Hunt later confirmed on ITV .
It is understood Labor plans to resolve the BNPL regulations as soon as possible if elected in July.
However, even if the policy were to start working on the first day of the government, which insiders say is “unlikely”, it would take at least another year for the new rules to take 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 product.
So once the plans are finally legislated through parliament, the FCA will still need to draft regulations and consult with the BNPL industry.
Then companies will need to be given time to implement any changes.
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