Sezzle denied lending licence in Calif
Sezzle are down 15 per cent after the buy now, pay later company announced that California regulators had denied it a lending licence, but it hopes to find a resolution.
The California Department of Business Oversight said it had denied Sezzle a loan because the Minnesota-based company - which is ASX-listed but doesn't conduct business in Australia - had engaged in "illegal unlicensed lending in the state".
Like Afterpay, Sezzle allows consumers to pay it 25 per cent of the purchase price at time of purchase and the rest in three equal instalments every fortnight.
Sezzle had contended it was engaged in purchasing credit sale contracts from merchants rather than issuing loans to consumers.
"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," the department said in a statement issued on Monday.
The department said it would regulate point-of-sale financing as loans if consumers, merchants and third-party financers treat them as such, even if there's contradictory language in applicable contracts.
Sezzle said on Thursday that its business model was "widely used by the Company's competition" and that it was "operating as a sales finance model and does not make loans".
"Sezzle's objective is to obtain the loan license for the purposes of removing those merchants from the financing process," chief executive Charlie Youakim said in a statement.
The company plans to work with the DBO "to correct any issues so that we can proceed with our plans to develop a loan product there," he said.
Sezzle has 15 days to appeal the administrative decision, department spokesman Mark Leyes told the Sacramento Business Journal.
Afterpay said that it was issued a California finance lender's license on November 12.
At 1203 AEDT, Sezzle shares were down 15.8 per cent to $1.76, while Afterpay shares were up 2.6 per cent to $30.05.
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