The Sezzle Inc (ASX: SZL) share price has started the year on a very disappointing note.
In afternoon trade the buy now pay later company's shares are down almost 16% to $1.76.
At one stage today Sezzle's shares were down approximately 20% at $1.68.
Why is the Sezzle share price crashing lower?
Investors have been selling Sezzle's shares after it provided an update on its California operations.
The release advises that the California Department of Business Oversight (DBO) has issued a public statement regarding its intention to not approve an application by Sezzle for a California Financing Law license to make loans.
What now?
Sezzle continues to operate in the state of California in partnership with retailers that originate retail instalment sales contracts and then assign them to Sezzle to service the payment processing.
Under this model, which is also widely used by the company's competitors, Sezzle is operating as a sales finance company and does not make loans.
However, it does wish to change its approach in the future. As a result, Sezzle's objective is to obtain the loan license in the near future so it can remove those merchants from the financing process.
It notes that the DBO has approved Afterpay Ltd (ASX: APT), which is operating under a similar sales finance model, between the dates of its application and the public statement. In light of this, it believes there is a path to a resolution.
Sezzle intends to continue to work with the DBO to correct any issues with its application in order to proceed with plans to develop a loan product in that market.
It stressed that it is committed to doing what is best for its partners and consumers and will work to resolve the issue quickly to reduce any potential impact on the business.
