Buy now, pay later: your rights over refunds as Missguided collapses

Buy now, pay later (BNPL) firms have pledged to refund shoppers affected by the collapse of the fast-fashion retailer Missguided.

The online clothing brand entered administration on 30 May owing suppliers millions of pounds and leaving customers in the dark about orders and refunds.

Administrators from Teneo are in charge until Frasers Group, the retail empire owned by the Sports Direct founder, Mike Ashley, takes over in August after a £20m deal.

The site’s low prices – it hit the headlines in 2019 for selling £1 bikinis – and BNPL options meant it was popular with shoppers who wanted to try on outfits at home before returning unwanted clothes.

BNPL allows shoppers to buy items and either pay for them in monthly or weekly instalments or delay settling the total balance for 30 days.

Missguided is not paying refunds, even for items that have already been returned, and customers have been told they are likely to get a “small fraction” of what they are owed from the administration process. Teneo has not responded to requests for comment.

Martyn James, the head of media at the complaints website Resolver, says: “Because businesses like Missguided are online, their business model – one of ordering clothes to try to then processing returns – leaves consumers exposed to big losses if the firm goes bust.”

However, big BNPL firms have confirmed that many of their customers will get their money back and have future payments cancelled.

While that is good news for shoppers, the unregulated sector has faced criticism for allowing customers to build up debt and for lax affordability checks, and should only be used by shoppers who can keep up with the repayments.

Citizens Advice research, published this month, found that more than two in five recent shoppers relied on credit cards and other borrowing to repay their BNPL debts.

The sector is set to be regulated by the Financial Conduct Authority but this is unlikely to happen until later this year or in 2023.

Will my BNPL lender give me a refund?

The UK’s big BNPL operators say most customers with a valid claim will be able to get a full refund. You can pause future payments by registering that you have returned items in the BNPL firm’s app or on its website.

Clearpay says customers who do not receive their purchases or who have returned an item will be repaid or have their debts cancelled. “Our customers will not be in a position where they are out of pocket or lose their legal rights to return,” a spokesperson says.

Klarna, the UK’s biggest BNPL operator, with millions of customers, says shoppers can open a dispute in the “usual way” and it will offer refunds where appropriate.

Laybuy, which allows shoppers to spread payments over six weekly instalments, says it will give customers who can show proof of a return a full refund.

PayPal, which also offers credit and BNPL options, says all of its customers can claim a refund if their purchase does not arrive or match its product description.

You can process refunds or open disputes by logging into your account with the relevant lender.

It helps if you have evidence that you have made a return or have attempted to contact Missguided.

If the BNPL firm decides not to uphold your complaint you can’t take the case to the financial ombudsman but you may be able to get a refund via your bank.

What should I do if I still need to return an item?

Missguided’s website is currently down for “maintenance” and it is not accepting orders or returns but it is still worth making a claim through your BNPL provider if you are stuck with unwanted items.

Laybuy customers are liable for payments if they can’t make a return but the company says it will take a “pragmatic approach … especially if the inability to make a return is likely to cause undue duress or hardship”.

A spokesperson says: “We encourage anyone in this situation to make contact with our customer service team to discuss their situation so that we can work with them to identify a solution. This might include developing a tailored repayment plan, pausing repayments or writing off the debt.”

Klarna encourages customers in this situation to open a dispute to allow it to investigate, and Clearpay says it will look at claims on a “case-by-case” basis.

What are my rights if I paid by debit or credit card?

Credit card customers have more protection for large orders than BNPL shoppers, as transactions between £100 and £30,000 are covered by section 75 of the Consumer Credit Act.

You don’t get this protection when you use BNPL, even if you used your credit card to pay because it was linked to your BNPL account.

Meanwhile, if your order was less than £100, or if you used a debit card, you will have to ask your card provider for a chargeback.

You can only do this after you have already complained to the retailer, and there is a time limit on chargebacks, which differs between banks.

You can also do a chargeback if you paid using your debit card through a BNPL platform such as Klarna.

However, you have to choose whether to pursue a refund via your bank or BNPL firm first, as you can’t have both disputes open at the same time.

If your chargeback request is unsuccessful, you can appeal against the decision through the financial ombudsman.

Finally, you could follow the administration process but this is likely to take months and you will only get some of your money back, if you get anything at all.