Department Of Business Oversight Takes Aim At Point-Of-Sale Transactions

Late last month, the California Department of Business Oversight took the unusual step of issuing a press release announcing that it had denied an application by Sezzle Inc. for a lender's license under the California Financing Law (Cal. Fin. Code § 22000 et seq.).  According to the Company's website, Sezzle "provides a payments platform that facilitates fast, secure and easy payments between consumers and retailers".  The Department's press release asserts that "the purported credit sales made by Sezzle's merchant partners were not bona fide, but, rather, were structured to evade otherwise applicable consumer protections". 

California's Financing Law (fka Finance Lenders Law) does not define the term "loan".  The Department also announced that it had issued an "interpretive opinion" [sic] to an unrelated company addressing whether its point-of-sale arrangements constituted loans.  I plan to cover that opinion next week.

"A strong hint to a blind horse"?

In my experience, it is very unusual for the Department to issue a press release announcing that it has denied an application for a license.  Denying a license based on alleged prior unlicensed activity is likely to have the unintended side effect of discouraging potential applicants from coming into compliance.  What if the DMV refused to issue a license to anyone who has ever driven with an expired license?