Sezzle Inc. and California's business regulator cleared up a dispute that appeared to threaten the Minneapolis fintech firm's ability to work in the nation's most populous state.

The kerfuffle, which went public just before New Year's Day, caused a 33% drop in the value of Sezzle's stock over the first two trading days of the year. By Friday, the company's shares had recovered most of that lost value.

In a statement to regulators and investors in Australia, where Sezzle shares are traded, the company said Friday it had obtained a lending license from the California Department of Business Oversight.

The agency on Thursday said it settled the dispute with Sezzle by levying a $28,000 fine and requiring the return of about $282,000 in fees collected from 17,000 Californians before the license was issued.

Sezzle's application for that license in September prompted the agency to review the company's operations. It found that Sezzle had already started doing business in the state before getting the license. On Dec. 30, the agency issued a statement saying Sezzle "had engaged in illegal unlicensed lending" and gave Sezzle two weeks to respond.

In the statement Friday, Sezzle founder and Chief Executive Charlie Youakim expressed thanks to the agency "for their prompt and open approach to resolving this matter in such a timely and professional manner. This is a great result for Sezzle and provides the platform for us to continue our planned growth strategy in the state of California."

The agency said it continues to investigate other companies that, like Sezzle, are providing "buy-now-pay-later" financing and other new payment methods to consumers when they shop online.

Sezzle and firms like it give online shoppers a chance to pay in installments rather than using a credit card at checkout of an e-commerce site. In Sezzle's system, it requires a 25% payment upfront and then three other no-interest payments scheduled every two weeks for six weeks. It makes money from receiving a percentage of the transaction value, as credit card firms do. It charges additional fees to the shoppers if they miss scheduled payments.

Before getting the California lending license, Sezzle said it relied on retailers in the state to initiate the loan to consumers. The retailers would then transfer the loan to Sezzle. But the California regulator said the process didn't meet its qualifications to be a bona fide transfer. Instead, it determined the transactions should be considered direct loans to the shopper by Sezzle.

After agreeing to the fine and refunds, the agency licensed Sezzle for the direct-to-consumer process.

Sezzle shares, which traded at A$2.09 before the dispute became public, dipped to as low as A$1.36 on Jan. 6. On Friday, they jumped 24 Australian cents to finish the week at A$2.01, a 14% gain.

Evan Ramstad • 612-673-4241