Financial Regulatory Bureau and Central Bank Release New Regulations: Personal Loan Interest and Fees "Transparency," Effective August 1st

Interface News Reporter | An Zhen

On the evening of March 15, the National Financial Regulatory Administration and the People’s Bank of China issued the “Regulations on Clear Disclosure of Personal Loan Business Comprehensive Financing Costs” (hereinafter referred to as the “Regulations”).

The Regulations consist of 11 articles. Within the existing framework of loan information disclosure supervision, they specify the scope, procedures, and steps for disclosing interest and fee information for personal loans, requiring lenders to present a clear comprehensive financing cost disclosure form that transparently details the interest and fee costs of personal loans.

In recent years, China’s personal loan market has developed rapidly, playing a positive role in promoting personal consumption, business operations, and maintaining steady and healthy economic growth. At the same time, issues such as irregularities in interest and fee disclosures, especially in internet lending, have occurred frequently. Inadequate and non-standard disclosure of personal loan interest and fees is a significant cause of these problems.

Coverage of All Types of Institutions and Fees

The Regulations clarify that the comprehensive financing cost of personal loans refers to all interest and fees borne by the borrower related to the loan, including but not limited to loan interest, installment fees, and late payment penalties in case of default. Financial institutions and third-party platforms should determine the annualized level of comprehensive financing costs in accordance with laws and regulations reasonably.

According to the Regulations, lenders should display a comprehensive financing cost disclosure form to borrowers, indicating the principal amount and itemizing all fees charged by the lender and partner institutions, clearly stating the fee standards and responsible entities.

A relevant official from the Financial Regulatory Administration told Interface News that the highlight of the Regulations is the coverage of all lending institutions. The Regulations apply not only to banks, consumer finance companies, auto finance companies, trust companies, and micro-lenders but also include third-party loan cooperation agencies.

Interface News notes that previously, the Financial Regulatory Administration held meetings with 11 platform operators, including Ctrip Travel and Fenqile, within a month. Both meetings emphasized that “platform operating agencies should strictly regulate marketing and promotional activities when cooperating with financial institutions and clearly disclose interest and fee information of lending products.”

The Regulations emphasize that lenders should strengthen management of partner agencies, promptly take corrective measures against violations or breaches, and in severe cases, terminate cooperation, pursue legal recovery of losses, and hold legal liabilities.

Interest and Fee Disclosure in Three Major Scenarios

The Regulations require lenders to clearly disclose the maximum comprehensive financing cost for personal loans in their business premises, official websites, and other channels under normal borrower performance.

A relevant official from the Financial Regulatory Administration explained to Interface News that before consumers apply for personal loans, borrowers should sign to confirm the disclosure form of comprehensive financing costs. For online personal loan applications, the disclosure form should be displayed via pop-up windows with mandatory reading time. For installment payments in online consumption scenarios, detailed information such as installment fees and default costs should be prominently displayed on the payment order page. For on-site personal loan applications, borrowers should sign the disclosure form before signing the loan agreement or proceeding with installment payments.

It is noteworthy that the Regulations do not cover credit card overdraft interest rates. According to the “Personal Loan Management Measures,” personal loans refer to foreign and domestic currency loans issued by lenders to qualified individuals for personal consumption, business operations, etc., and do not include credit card overdrafts.

The aforementioned official stated that considering the practical needs of financial institutions and their partners to adjust business processes, systems, modify cooperation agreements, internal management systems, and conduct policy training, the Regulations reserve about five months for preparation, with official implementation scheduled for August 1. Additionally, following the “new-old separation” principle, new businesses must strictly follow the disclosure requirements of the Regulations.

“Furthermore, regulatory agencies are promoting unified operational standards for comprehensive financing cost disclosure. We are organizing the creation of sample disclosure forms for comprehensive financing costs and for installment payment pages in online consumption scenarios,” the official from the Financial Regulatory Administration added.

A relevant department official from the People’s Bank of China told Interface News that by refining the scope and procedures for disclosing interest and fee information, clarifying responsibilities, and strengthening supervision, the implementation of the “Personal Loan Comprehensive Financing Cost Disclosure Form” will better ensure the legal rights of financial consumers, promote transparency, and facilitate the healthy development of the industry.