Humm Group ordered to stop accepting new BNPL customers

Humm Group ordered to stop accepting new BNPL customers

Humm Group’s (ASX: HUM) buy-now pay-later (BNPL) subsidiary has been ordered to stop accepting new customers after the financial watchdog raised concerns about the product’s suitability.

Humm BNPL has been restricted by an interim stop order issued by the Australian Securities and Investments Commission (ASIC) which restricts the ability to provide the BNPL product to new customers.

The fintech assures investors the company can continue to service existing BNPL customers to whom the product has already been provided.

As per an ASX statement from humm, the order was issued in relation to concerns regarding the target market determination for the BNPL product - a statement on the description of the product’s target market including their likely objectives, financial situation and needs.

According to that document, humm’s target market is 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 they meet those criteria, 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 is seeking to work closely with ASIC to urgently address the concerns raised in relation to the humm BNPL target market determination,” humm said.

ASIC has been approached for comment regarding the interim stop order.

It 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 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.

For context, Zip’s total transaction volume for the same half was $4.9 billion, though the company did not offer a breakdown of how its two products Zip Pay (the more traditional ‘Pay in 4’ model) and Zip Money (for larger purchases) performed independently.

The news comes on the heels of the Federal Government announcing it would regulate BNPL schemes as credit products in an effort to mitigate the “growing dangers” of consumers racking up too much debt.

Assistant Treasurer Stephen Jones unveiled the reform at the Responsible Lending and Borrowing Summit, warning that tougher regulation of the sector was needed to protect vulnerable Australians.

The move comes six months since a Treasury paper assessed three possible alternative options, recommending the Government either choose the status quo with self-regulation, subjecting services to limited regulation under the Credit Act, or treating BNPL under the same laws as credit card providers.

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