Mobile payments cease and desist order received by Square in Illinois

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Square Inc. mobile paymentsRegulators within the state have halted the company from processing transactions until it obtains licensing.

Illinois regulators have just slapped Square – a startup mobile payments company that is making a major splash in the industry – with a cease and desist order, saying that it has not taken adequate steps to receive appropriate licensing in the state.

This has ground the progress of the smartphone transactions from that company to a halt.

It has also meant that a number of small businesses such as coffee shops and other retailers – which were growing in numbers, particularly in Chicago – suddenly cannot use their smartphones and tablets to process mobile payments through that company’s service. According to Square, it has been providing businesses with their services quite successfully and has, for months, been working with the Illinois Department of Financial and Professional Regulation in order to help to overcome the licensing challenge.

Unfortunately, the progress didn’t happen fast enough and it now cannot process mobile payments until a solution is found.

The department issued a cease and desist order despite the fact that it was still working with the company to help to find a way to provide a license. Though the official reason for the order has not yet been identified, it appears to be that the lawyers and negotiators are unable to find a way around a law in Illinois called the Transmitters of Money Act.

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That state Statute says that “No person may engage in this State in the business of selling or issuing payment instruments, transmitting money, or exchanging, for compensation, payment instruments or money of the United States government or a foreign government to or from money of another government without first obtaining a license under this Act.” As no license has yet been issued to Square, it is not permitted to process mobile payments within the state.

Square released a statement about the order that simply said “We’ve been in close contact with the Illinois Division of Financial Institutions for several months and are addressing their concerns.”

Some confusion does seem to lie in the fact that while Square does process mobile payments, it does not hold funds and this jurisdiction therefore, may not apply. It is unlikely that the company will withdraw from the state, but will probably remain in talks with the state in order to better explain the way that its services function.

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