Humm’s BNPL product back in business after ASIC lifts stop order

The nation’s financial watchdog has revoked an interim stop order against Humm Group (ASX: HUM), which was ordered to put a pause on accepting new buy-now pay-later customers due to concerns about the product’s suitability.

The Australian Securities and Investments Commission (ASIC) issued the stop order three days ago, flagging concerns about Humm’s target market determination for its BNPL products.

Target market determination rules require companies that offer BNPL products to consider whether a product aligns with the financial objectives, circumstances and needs of consumers.

At the time ASIC launched its stop order against humm, the fintech's target market fell under those who meet the following objectives and financial situations:

• Permanent residents of Australia,
• 18 years of age or older,
• Have a permanent job of 20-plus hours per week or are on an aged/veteran’s pension,
• Have a satisfactory credit history, and
• Require the ability to make purchases and manage repayments over a specific period of time for a reasonable fee.

If the criteria are met, customers can access the financial product and repay a credit limit of up to $30,000, with repayment terms from five fortnightly repayments up to 60 months on a no-interest basis. Various fees can be incurred including establishment fees, monthly account-keeping fees and late fees.

“Humm Group has addressed ASIC’s concerns regarding the target market determination for the Humm Buy Now Pay Later product,” the company said in an ASX announcement.

“The Humm BNPL product is again available to new customers.”

The news comes after humm recently renamed its BNPL business to ‘Point of Sale Payment Plans’ (PosPP) considering the market definition of the financial product is mostly attributed to small ticket ‘Pay in 4’ financing made popular by the likes of Afterpay and Zip (ASX: ZIP).

As these small ticket financing deals are less than 1.2 per cent of humm’s total receivables, the business was renamed to ‘more accurately reflect its products and services’.

In 2H23, the PosPP segment generated volumes of $604.6 million, down 7 per cent year-on-year, reflecting the run-off from humm decommissioning its small ticket products humm NZ, bundll and hummpro.

This income is about on par with humm’s consumer credit cards business which generated $647 million, but less than its commercial finance arm that brought in $744.8 million in the half.

The revoked order comes only one week after the federal government announced it will regulate BNPL schemes as credit productsin an effort to mitigate the “growing dangers” of consumers racking up too much debt.

At the time, Humm announced it fully supported the government’s decision, describing the reform as a balanced and proportional approach that will ensure consumer protection and promote responsible lending practices.