More Transparent! Personal Loan Comprehensive Financing Cost Will Be Disclosed to Borrowers

The State Financial Supervision and Administration Bureau and the People’s Bank of China jointly issued the “Regulations on Clear Disclosure of the Total Cost of Personal Loan Business” on March 15, requiring lenders to present borrowers with a clear disclosure form of the total financing cost, transparently revealing the interest and fee costs of personal loans to promote transparency and sunshine in all loan-related charges.

Officials from relevant departments of the Financial Supervision Bureau and the People’s Bank of China stated that in recent years, China’s personal loan market has developed rapidly. At the same time, issues such as irregularities and lack of transparency in the disclosure of loan interest and fee information have emerged, which can easily lead to financial consumer disputes, affect the effectiveness of interest rate policies, and weaken the quality and efficiency of financial services supporting the real economy. Therefore, it is necessary to establish regulatory rules to promote industry standardization and healthy development.

To accurately and comprehensively reflect the actual financing costs borne by borrowers in personal loan transactions, the regulations stipulate that all costs related to personal loans, including but not limited to interest, installment fees, credit enhancement service fees, and other financing costs under normal performance, as well as late payment penalties and potential costs in case of default, should be included in the total financing cost.

The regulations adhere to a comprehensive coverage of all lending institutions, applicable to banks, consumer finance companies, auto finance companies, trust companies, micro-lenders, and other types of lenders.

Lenders are required to clearly disclose to borrowers, when conducting personal loan business, each specific cost item, collection method, collection standard (converted to an annualized rate), and the collecting entity. They must also explicitly remind borrowers that, apart from the disclosed costs, neither the lender nor its partners will charge any other interest or fees related to the loan.

In practical operations, the regulations specify that for on-site personal loan transactions, borrowers must sign and confirm the comprehensive financing cost disclosure form before signing the loan agreement or initiating installment payments. For online personal loan transactions, the disclosure form must be displayed via a pop-up window, with a mandatory reading period, and the borrower must confirm before signing the loan agreement or starting installments. In online consumer scenarios involving installment payments, the relevant information about the total financing cost must be prominently and clearly displayed on the payment page of the order.

The regulations will take effect on August 1 of this year. During the transition period, new business must strictly follow the disclosure requirements for the total financing cost according to the “new and old” separation principle.