Buy now, pay later firm Sezzle wins California licence

Buy now, pay later platform Sezzle has settled a dispute with regulators to win a Californian credit lending licence.

Founders of buy now, pay later company Sezzle Charlie Youakim and Paul Paradis.

Buy now, pay later platform Sezzle has been approved for a Californian credit lending licence after reaching a settlement over loans the state’s regulator said were made illegally.

The US-based, ASX-listed Afterpay rival has agreed to stop making loans that breach the state’s financing laws, refund $US282,000 ($409,000) to Californian consumers and pay a $US28,200 penalty to the California Department of Business Oversight.

The dispute related to Sezzle’s previous trade in the state of California under a retail instalment structure, where the retailer initiated the instalment loan and transferred it to Sezzle.

Chief executive officer Charlie Youakim said negotiations were “prompt”.

“This is a great result for Sezzle and provides the platform for us to continue our planned growth strategy in the state of California,” he said.

Shareholders responded positively to the update with stocks rising by 13.56 per cent to close on Friday at $2.01 per share.

A DBO statement said: “The refunds represent all of the fees Sezzle has collected from almost 17,000 California consumers in transactions the DBO concluded were illegal loans.

“The DBO concluded the purported credit sales made by Sezzle’s merchant partners were not bona fide but, rather, were structured to evade otherwise applicable consumer protections.”

Uncertainty over Sezzle’s Californian prospects has triggered large fluctuations in its share price in recent weeks.

The group’s share price slumped 20 per cent on December 30, to $1.66, following the DBO’s decision to reject its initial lending licence application.

But a market update on January 7 saying Sezzle was in discussions with the DBO bolstered shareholder confidence, triggering a 40 per cent share price surge to $1.93.