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

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

Teneo administrators are in charge until Frasers Group takes over the retail empire of Sports Direct founder Mike Ashley in August after a £20million deal.

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

BNPL allows buyers to purchase items and either pay for them in monthly or weekly installments, or defer payment of the total amount by 30 days.
Missguided will not issue refunds, even for items that have already been returned, and customers have been told they are likely to receive a “small fraction” of what they are owed from the administrative process. Teneo has not responded to requests for comment.

Martyn James, media chief for complaints website Resolver, said: “With companies like Missguided online, their business model – one of ordering clothes and then processing returns – exposes consumers to huge losses if the company goes bust. ”

However, major BNPL firms have confirmed that many of their customers will be getting their money back and future payments will be cancelled.

While this is good news for buyers, the unregulated sector has been criticized for allowing customers to build up debt and for lax affordability reviews, and should only be used by buyers who can keep up with repayments.

A Citizens Advice study published this month found that more than two in five shoppers have recently used credit cards and other loans to pay off their BNPL debt.

The sector is set to be regulated by the Financial Conduct Authority, but that likely won’t happen before the end of this year or in 2023.