Let's face it, all buy now, pay later (BNPL) providers are a little bit dodgy.
These darlings of the fin tech industry exploit a loophole in the National Credit Code to offer customers thousands of dollars of credit without having to do anything close to responsible lending checks or offering proper financial hardship policies.
But when it comes to sending customers into growing levels of unaffordable debt, there's one BNPL provider that really takes the cake.
Humm proudly sells itself as the BNPL for the "big things" in life. And, boy, are their spending limits big.
While other BNPL providers will cut you off when you reach a $3000 limit, Humm will let you spend up to $30,000 on big-ticket items including home renovations.
Here at CHOICE, we think there are a couple of big things wrong with sending customers into $30,000 of debt without properly assessing their ability to repay it.
And it seems that even Humm aren't clear on how they assess suitability for this amount of credit – when we asked them to explain their process they gave us four different answers.
Based on their multiple responses, it's our understanding that for amounts over $2000, Humm says it does check things such as employment status, any negative payment history, and 'product suitability'.
But only when lending amounts of more than $15,000 does it bother to do an assessment of a customer's general living expenses, for example.
We think there are a couple of big things wrong with sending customers into $30,000 of debt without properly assessing their ability to repay it
Our in-house researcher Wendy Evans, who has done some deep digging into BNPL providers, says there are also some big issues with the rigour of Humm's 'due diligence'.
"Their background check consists of checking things like ID, income and bank statements, but they are not doing a full credit check, like a bank would on a loan, to assess affordability," says Evans.
"And although this means applying for Humm credit won't affect your credit record, Humm can happily report you to debt collection agencies (and slug you a $30 collection fee for the privilege) if you default on your account, which will affect your credit rating."
CHOICE researcher Wendy Evans says there are big issues with the rigour of Humm's 'due diligence'.
Humm boasts that you can repay your purchases over a five-year period. But if you choose to do so, you'll be hit with an $8 monthly fee (this applies to purchases that you don't pay back within five months).
"If you had a 60-month payment plan, you'd spend $480 in monthly fees alone. And that's not including establishment fees for larger purchases or late fees if you miss a payment," says Evans.
Fees charged by BNPLs may be much worse for your hip pocket than an interest chargeWendy Evans, BNPL researcher, CHOICE
The company also advertises that you can use its service to pay your bills on time. This is a totally unnecessary proposition. If you're struggling to pay your bills there are much better options available. For example, essential services like utility companies are required by law to offer you payment assistance and hardship arrangements.
Oh, and Humm will slap you with an extra fee when you use it to pay your bills, too.
"Humm charges an $8 monthly fee when using it to pay bills with Bpay – this can add up," says Evans. "If, for example, you paid an $80 bill off over five months, you'd spend $40 in fees. That's an increase on your bill of 50%."
This is unregulated credit, pure and simple. It's debt normalisation, and it puts vulnerable people at risk of financial harmWendy Evans, BNPL researcher, CHOICE
"If you put that $80 bill on a high interest credit card with a 20% interest rate, paying it back over the same five-month period, you would only pay about $4 interest, not including any interest free days you may be eligible for. That's a huge difference.
"We're not recommending you do this either, but it goes to show how fees charged by BNPLs may be much worse for your hip pocket than an interest charge."
CHOICE Humm researcher Wendy Evans and CEO Alan Kirkland explain why Humm scored itself a Shonky this year.
All up, this is a risky product for Australians – especially at a time when debt levels are spiralling for many households.
In a recent national survey, more than three in five (63%) respondents said getting help from their utility provider to pay their bill over time without extra fees would be their first option.
Evans says people should steer clear of this Shonky product, Humm.
"This isn't layby, this isn't a credit card – this is unregulated credit, pure and simple. It's debt normalisation, and it puts vulnerable people at risk of financial harm."