The California Department of Financial Protection and Innovation (CFPI) recently entered into a consent order with a Florida-based company engaged in the offering and selling of “Buy Now Pay Later Loans” (BNPL). BNPL products are considered by CFPI to be a type of short-term financing that allows consumers to make purchases and pay for them at a later date, often without interest. Sometimes referred to as point-of-sale installment loans, BNPL products have become an increasingly popular payment option that has come under the regulatory umbrella of the CFPI. Following an investigation into the matter, CFPI determined the company engaged in the business of a financial lender in California, without obtaining the required license. Pursuant to California Financial Code Section 22100(a), companies offering BNPL products must be licensed and, as an approved lender, must consider consumers’ ability to repay, are subject to rate caps and costs and must respond to consumer complaints.
As part of the Consent Order, the Company has agreed, among other things, to the following:
- The Company will not engage in the business of a financial lender in California unless it obtains a license to conduct such business;
- The company will pay an administrative penalty of $2,500 to the CFPI; and
- The company will reimburse all fees paid to it by California consumers in connection with BNPL products.