Humm shares fall as regulator stops it from signing up new customers

James EyersSenior Reporter

Updated May 26, 2023 – 6.45pm,first published at 3.49pm

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Humm shares plunged by almost 10 per cent on Friday afternoon after the buy now, pay later provider said the corporate regulator had stopped it from issuing its product to new customers.

Humm told investors that the Australian Securities and Investments Commission had issued an interim stop order relating to concerns it has about the company’s “target market determination”.

On Friday night, Humm said the issue had been resolved. A spokesman for the company said the interim stop order “has been revoked”.

“hummgroup has addressed ASIC’s concerns regarding the target market determination for the humm buy now, pay later product,” he said. “As of [Friday] evening, the humm BNPL product is again available to new customers.”

Meanwhile, Latitude fell 3.5 per cent to $1.25 after cutting its profit guidance and scrapping its interim dividend, after lost income and higher credit losses in the aftermath of a cyberattack in March. An anticipated increase in credit provisions to 4.2 per cent would translate to a cash net profit of $5 million to $10 million for the half, and a statutory loss of $95 million to $105 million.

Target market determinations are mandatory written documents that have to be published before a financial services company distributes products to the retail market. They describe the types of customers the product is likely to be suitable for, and form part of the “design and distribution obligations” imposed on issuers by the regulator.

Humm has been prevented from offering buy now, pay later products to new customers. Jason South

The stop order on Humm is the first time ASIC has used its powers to prevent the issuance of a buy now, pay later product. Sources said the regulator was concerned that the product’s target market, as identified by the company, did not align with the details in its terms and conditions. They were relatively minor in nature, AFR Weekend has been told.

Buy now, pay later is coming under stricter regulatory oversight. This week, the government said it would regulate all providers under national credit laws and require them to conduct responsible lending checks on customers to ensure they were suitable. Under the new regulation, the government said all players would be forced to comply with the design and distribution obligations.

“Hummgroup is complying with the requirements of the interim stop order which restricts the ability to provide the Humm BNPL product to new customers,” the company said in a brief statement to the ASX on Friday morning.