Buy Now, Pay Later Provider Cited for “Illegal Loans” in California

Infraction leads to customer refunds

Andy Spears
2 min readAug 8, 2022


Photo by on Unsplash

I’ve written quite a bit recently about the growing Buy Now, Pay Later industry.

Today’s installment comes from an article by Jason Mikula in Fintech Business Weekly. Mikula notes that a California regulatory board has cited Buy Now, Pay Later operator Four for operating without a license.

California’s banking regulator, the DFPI, entered into a consent order with BNPL firm Four over what it described as the company’s “illegal loans” in the state.

While that language sounds serious, the order stems from the apparently minor infraction of Four operating in the state without a California Financing Law (CFL) license.

Per the consent order, Four will refund $13,065 in fees illegally charged to California consumers and pay a $2,500 administrative penalty to the DFPI.

Concurrent with the consent order, the DFPI granted Four’s application for a CFL license.

In the grand scheme of things, this isn’t a big problem for the provider or its California customers.

However, it is another reminder of the challenges BNPL providers face — and another chance to remind consumers of the potential risks of these products.

One survey indicated:

32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.

If used properly, these products can provide a convenient way to manage finances and also a relatively affordable way to access credit.

Of course, if nearly 1/3 of users are skipping bills to make BNPL payments, that may mean the access to credit is a little too easy.

Further, if customers are paying for groceries in four installments due to rising costs and stagnant wages, that points to a larger issue of systemic economic inequality.

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .