On April 22, 2020, the California Department of Business Oversight (DBO) announced a settlement with a point-of-sale lender that offered consumers a “buy now, pay later” option for payment. The DBO alleged that these products were akin to lending, but were illegal loans because the lender did not have the required state law license.
According to the DBO’s press release, the point-of-sale lender targeted young consumers who were unable to qualify for traditional financing options, and provided an option for them to pay a percentage of the purchase price at the time of their purchase and the remainder in three equal installments. The point-of-sale lender allegedly collected a cut 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 more than $685,500 to California consumers, and pay over $68,500 in penalties.