- Newly-listed fintech rival Sezzle (SZL) has been granted a lending licence to streamline business in California
- The licence was originally rejected late last year, causing a share price slump
- The California Department of Business Oversight accused Sezzle of illegal lending in the state
- After appealing the decision, Sezzle has now been approved for the licence
- However, Sezzle will need to pay $450,000 in fines and refunds to get the licence
- Still, shares in the company are up almost 17 per cent today and trading for just over $2 each
New buy now, pay later competitor Sezzle (SZL) opened hot on the market today after its lending licence application was finally approved.
However, the application was initially rejected by the California Department of Business Insight (DBO) in late December 2019.
The government department accused Sezzle of “illegal unlicenced lending in the state”, causing shares in the company to shave 70 cents off of their value as they dropped 35 per cent in the first week of the year.
Sezzle appealed the decision, however, and released a statement to shareholders a week later saying it was confident the rejection would be overturned.
Sezzle’s discussions with the California DBO were strengthened by the fact that Afterpay — the buy now, pay later giant who operates on a similar business model to Sezzle — had been granted the same licence just two months earlier.
Today, Sezzle shares have surged over 16 per cent and are nearing the price they were before the new year drop.
Being granted the licence allows the company to adjust and streamline the way it does its business. While Sezzle was already operating in California, it was previously working under a “retail instalment structure”, which means retailers initiated loans for consumers and then transferred the loan to Sezzle.
With today’s new licence, Sezzle can now transition into a direct lending structure, cutting out the middle man in its process.
Sezzle Chairman and CEO Charlie Youakim said this is a “great result” for the company.
“We are thankful to the California Department of Business Oversight for their prompt and open approach to resolving this matter in such a timely and professional manner,” Charlie said.
What Sezzle’s statement to shareholders failed to mention, however, was that the licence approval comes with a US$310,000 (AUD$450,000) price tag.
The California DBO said Sezzle will need to refund US$282,000 (AUD$409,000) to California consumers — all of the fees collected by Sezzle’s illegal loans — and pay a US$28,200 (AUD$40,900) penalty for its actions.
Still, the Aussie market has taken well to today’s announcement. In early afternoon trade, Sezzle shares are up 16.95 per cent and trading for $2.07 each.