On March 15, 2020, the California Department of Business Oversight (DBO) announced a settlement with a point-of-sale lender that offered an allegedly illegal “buy now, pay later” option targeted to young consumers. After an investigation, DBO concluded that these loans were illegal because the lender did not have the requisite state license at the time it engaged as a finance lender.
According to the DBO’s announcement, the point-of-sale lender targeted consumers who were unable to qualify for traditional financing options, such as credit cards. As an alternative, the lender required consumers to pay 25 percent of the purchase price at the time of the purchase and the remainder in subsequent installments. The point-of-sale lender allegedly collected a portion of each transaction from merchants and late fees from consumers who missed a payment.
Under the settlement, the lender will cease making loans until it has a California Financing Law license, refund $905,000 to California consumers, and pay more than $90,000 in administrative fees.
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