California grants loan license to Sezzle’s latest payment holding
The license is a big win for the Minneapolis-based Australian company as it seeks to gain a foothold in the rapidly growing now-pay later buyout industry that has proven popular with millennials.
“First of all. The industry is growing like crazy. The general understanding of retailers is that this is a solution you have to offer your customers,” Sezzze chief executive told Reuters by phone. , Charlie Youakim.
The California Department of Business Oversight (DBO) initially rejected Sezzle’s license application last month after calling the company for making “illegal unlicensed loans” in the state. He said Thursday that Sezzle would have to reimburse California consumers $ 282,000 and pay a penalty of $ 28,200.
Youakim said that while what happened in California was surprising, Sezzle had hired a company to conduct another study on loan laws in all of the US states in which it operates.
“I will be directly involved in any work with regulators in the future,” he said.
Sezzle offers small interest-free installment loans to its clients. Like other buy-now companies, it comes under intense attention from regulators and market watchers. Some question the business model and whether such credit should be treated with the same scrutiny as bank loans.
The license now allows Sezzle to structure its credit offerings directly to consumers, thereby removing merchants from the process.
Shares of the company climbed 26% to A $ 2.23 on Friday in Australia, their highest level since mid-December.
“By moving to a direct lending relationship with the consumer, the merchant is no longer a party to the loan, and if you put yourself in the shoes of the retailer, it increases our value to them,” Youakim said.
Australian firm BNPL, Baron Afterpay Ltd, has also come under regulatory scrutiny, but that hasn’t shaken investor growth expectations, as its shares rose more than 130% last year.
Sweden’s Klarna, a BNPL player and one of Europe’s most valued fintech companies, is making his Australian debut this year with help from the Commonwealth Bank of Australia.
Reporting by Nikhil Kurian Nainan and Shriya Ramakrishnan; Editing by Bill Berkrot and Stephen Coates