Regulator reaches settlement with Four, customers will receive refunds
The California Department of Financial Protection and Innovation (DFPI) has issued a citation against Buy Now, Pay Later provider Four for offering illegal loans in the state. The regulatory agency has reached a settlement with Four and customers who received short-term credit from Four prior to the company being licensed will receive refunds.
According to DFPI, Four was operating in the state without a lending license. This despite previous citations against providers like Sezzle and Klarna.
As Buy Now, Pay Later products gain popularity, DFPI notes that the agency, ". . . continues to lead the way on oversight, clarifying late last year that BNPL products are loans and that the companies that offer them must comply with California’s state lending rules."
As part of the settlement agreement, Four will pay $2500 in penalties to DFPI and refund more than $13,000 to consumers who obtained Buy Now, Pay Later loans from Four before the company was licensed. Four has agreed not to offer additional BNPL loans in the state until it has completed the licensing process.
The refunds represent the fees Four Technologies collected from consumers in transactions the DFPI concluded were illegal loans.
DFPI also put other providers on notice that it is continuing to investigate consumer complaints about BNPL providers and that it considers BNPL products loans that require licensing under California law.
California's DFPI has broad authority over financial offerings in the state and licenses and regulates financial services, including state-chartered banks and credit unions, money transmitters, securities broker-dealers, investment advisers, non-bank installment lenders, payday lenders, mortgage lenders and servicers, escrow companies, franchisors, and more.