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Affirm, Max Levchin’s new consumer lending company, just scooped up a new head of legal compliance to make sure its lending business is in for smooth sailing.

We wouldn’t normally cover a new legal executive appointment, but in this case, it shows how critical regulatory compliance is to the fledgling financial startup.

The company has hired Manuel (Manny) Alvarez to head its first head of legal compliance and chief counsel. Alvarez was previously an enforcement attorney for the Consumer Financial Protection Bureau.

As with anything else involving payments, following strict regulations is a must. But Alvarez wants to integrate compliance with product development and operations as early as possible, he told VentureBeat in an interview.

“I think the biggest challenge will be figuring out how to apply regulations written with the traditional world in mind” to the online model Affirm is developing, Alvarez said.

The company, which raised $45 million last month, is a new take on online credit.

Affirm is also adding Khosla Ventures’ Keith Rabois and Lightspeed Ventures’ Jeremy Liew to its board of directors.

In short, Affirm offers an alternative to traditional payments forms online. Its customers can use their Affirm account to pay when shopping from partner retailers, which they later pay off using debit cards, credit cards, bank transfers, or checks. The company uses a variety of personal data points to determine interest rates and how much credit to extend to each person.

In order to make sure Affirm’s service is legally compliant and avoid having to do damage control later on, Alvarez will actually work pretty closely with the product team, he said.

“The challenges are primarily related to the fact that this is a technology company… Many regulations do not take into account the implications of technology in the traditional consumer lending space,” he said.

Mobile is one challenge specific to the digital era. For example, legal disclosures are pretty easy to do when mailing documents, and the industry has even gotten a handle on doing this on the desktop. But what about mobile devices’ much smaller screens? Figuring out what to fit into the limited real estate in a legal yet visually efficient way is one thing Affirm’s team will have to solve.

There has also been an increase in regulatory scrutiny on consumer-facing financial tech companies in the last few years, according to Alvarez. The 2010 Dodd-Frank act, for example, created an entirely new regulatory agency, which has motivated other state and federal agencies to take a closer look at how they oversee these companies.

“I definitely think that technology introduces and magnifies concerns that have already existed,” said Alvarez when I asked him about the increasing shift towards technology-based payments. Privacy is an example of one such area of concern.

So what about fraud, something Affirm claims on its website it has none of? That area is entrusted to cofounder Nathan Gettings, who heads up Affirm’s risk department.

Alvarez did concede that fraud is naturally something a company like Affirm can’t take lightly, although he’s confident the company will be just fine.

He added that he was very impressed by the fact that the company is making legal compliance a priority so early.

Along with Alvarez, Affirm is also welcoming current investors Rabois and Liew to its board.

Rabois has previously worked at PayPal and served as Square’s chief operating officer before becoming a partner at Khosla, giving him a fair amount of experience and expertise in the payments space.

Liew has been the managing director of Zest Finance, a company that uses big data to give lenders a better understanding of risk.

A few companies, including Beautylish, Twice, and Faraday, are already using Affirm’s product.

Affirm is the second startup to come out of Levchin’s incubator, HVF, after fertility-monitoring app Glow. The company is based in San Francisco.

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