(Reuters) - Sezzle Inc (AX:SZL) said on Friday that California approved its application for a lending license in the state, a win for the buy-now-pay-later company whose earlier request was rejected last month.
The Minneapolis-based but Australia-listed company, offers U.S. and Canadian consumers small, interest-free installment loans. In return, it takes over the sales contract between the consumer and merchant for payment processing.
The California Department of Business Oversight, which regulates financial service providers in the state, had determined that Sezzle was already engaged in lending without a license since it was purchasing these payment contracts, thereby violating its financing laws.
Sezzle on Friday said the approval would now allow the company to shift to a direct structure that would remove merchants from the financing process.
"This is a great result for Sezzle and provides the platform for us to continue our planned growth strategy in the state of California,” Sezzle Chief Executive Charlie Youakim said in a statement.
Companies like Sezzle have gained popularity with young shoppers by providing them with easy credit to spend online.
The buy-now-pay-later sector has come under scrutiny, with regulators questioning the business model and whether such credit should be treated as a bank loan.