A LARGE company based on the “buy now, pay later” principle has fallen into insolvency.
The UK arm of Laybuy, which has a customer base of around 300,000 customers, has appointed FTI Consulting LLP as insolvency administrator.
Laybuy offers a buy now, pay later service alternative to credit cards.
This allows customers to split payments into six-week installments.
However, Laybuy is currently no longer accepting new transactions.
However, customers should continue to make their payments as usual if they took out a loan from the company before the bankruptcy.
The company operates in New Zealand, Australia and the UK and serves around 500,000 users worldwide.
The New Zealand-based company shut down its website over a week ago and on June 17, Laybuy Group Holdings Limited entered insolvency proceedings.
Insolvency proceedings are initiated by creditors or banks who believe that the company cannot pay its debts.
Following the official collapse of the UK office, its administrators are working closely with the liquidators of Deloitte New Zealand and Deloitte Australia, who are now responsible for managing the entire business.
Laybuy had already put itself up for sale in April and was reportedly considering delisting from New Zealand’s junior stock exchange.
The insolvency administrators were appointed by the boards of the parent companies earlier this month after efforts to secure additional investment or sell the business or assets failed.
As a result, it became necessary to initiate insolvency proceedings for the British company.
However, it must be taken into account that the company could still be sold in the future.
Sam Ballinger, one of the joint administrators, said: “The joint administrators are currently reviewing the options available to the companies and supporting employees, dealers and other affected stakeholders during this difficult time.
“Laybuy is not currently accepting new transactions. However, customers should continue to make payments as usual.”
“Further information will be available in the coming days at www.fticonsulting.com/uk/creditors-portal/laybuy-uk.”
What does “buy now, pay later” mean?
Unlike traditional loans, such as credit cards, “buy now, pay later” loans are interest-free.
However, this also involves risks, as many providers are not regulated and buyers therefore do not enjoy the same protection as with other forms of credit.
The most important providers are Klarna, Clearpay and Laybuy.
These products allow consumers to spread the cost of their purchases over a set period of time without interest.
Klarna, for example, offers the “Pay in Three” product, which allows customers to pay for a purchase in three interest-free monthly installments.
Clearpay customers can pay in four interest-free instalments over six weeks.
However, since BNPL products are not subject to regulation, users do not currently enjoy the same protection as with other loan agreements.
For example, banks must ensure that they do not lend their customers more money than they can afford by checking their creditworthiness and finances.
However, BNPL providers are not obliged to implement such strict controls, although some companies such as Klarna have voluntarily introduced these controls.
Customers of regulated financial firms are also protected by the Financial Ombudsman Service (FOS), which resolves disputes.
However, BNPL users are currently unable to refer their claims to the FOS if they believe they have been treated unfairly.
One of the largest BNPL companies told The Sun it had asked the FOS several times for voluntary membership but had been refused on the grounds that it was subject to regulation.
The Sun had previously reported exclusively 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, sparking a backlash from angry customers.
Normally, customers can pay at Laybuy in two ways.
One option is to pay directly through a retailer where you shop online as usual and then select Laybuy as a payment option at checkout.
Alternatively, customers can access specific brands via the app and Laybuy will fill in all payment details during the checkout process.
MORE NEWS ON BUY NOW, PAY LATER
The controversial plans to regulate BNPL products have been repeatedly postponed since they were first announced by the government in 2021.
The Sun has learned that the plans have dragged on for so long that the two senior policy advisers who have designed the framework so far have both now left the Treasury.
Several insiders involved in talks with the government and Labour say that regardless of who takes the baton in July, it will still be more than a year before the rules are implemented.
We previously revealed in January that the government had put the plans on hold until after the election over concerns the rules could result in BNPL companies having to stop offering products in the UK during a cost of living crisis, something Chancellor of the Exchequer Jeremy Hunt later confirmed on ITV.
It is believed that the Labour Party will want to tackle BNPL regulation as quickly as possible if elected in July.
But even if work on the relevant regulation were to begin on the first day the government takes office – which insiders say is “unlikely” – it would take at least another year for the new rules to come into force.
This is because while the Treasury is responsible for drafting new laws, the City’s regulator, the Financial Conduct Authority (FCA), would be responsible for regulating the products.
If the plans are finally passed by Parliament, the FCA will still need to issue the regulations and consult with the BNPL industry.
Companies must then be given time to implement any changes.