Sezzle Wins Lending License in California
Minneapolis fintech startup Sezzle Inc. has secured a lending license in California weeks after its initial application was rejected.
The license enables the company to continue operating its “buy now, pay later” platform in the state. The platform allows consumers to make online purchases and divide payments over six weeks.
As part of a settlement with California regulators, Sezzle is required to refund $282,000 to customers who used the platform before the company had the license. Sezzle must pay an additional $28,200 fine.
When Sezzle first applied for a lending license in California late last year, the state’s department of business oversight rejected the company’s request. At the time, the department said Sezzle had been engaged in “illegal unlicensed lending in the state.”
The rejection marked a big blow for Sezzle, especially after Australian competitor Afterpay had secured its own lending license in California. Sezzle’s shares fell sharply after the denial.
Charlie Youakim, Sezzle’s CEO, said the company had applied for the license because it’s shifting to a direct lending model. Initially, merchants would initiate the transaction and transfer to Sezzle for payment processing.
Based on Sezzle’s research, California is the only state that requires a license to accommodate the change, Youakim said.
“We’re doing some more research on the other states to make sure California is the only state where we need to register,” he said.
Sezzle’s platform is available for a number of brands, including Akira, Etnies, and Jessica Simpson. The company’s long-term goal is to move into big-box retailers like Target and Walmart.