Personal Loan Business Welcomes New Regulations; Comprehensive Financing Costs Must Be "Clearly Priced"

To maintain order in the personal loan market, protect the legitimate rights and interests of financial consumers, and improve the quality and efficiency of financial services, the National Financial Regulatory Administration and the People’s Bank of China recently jointly issued the “Regulations on Clear Disclosure of Comprehensive Financing Costs for Personal Loan Business” (hereinafter referred to as the “Regulations”). The Regulations consist of 11 articles and are designed to refine the scope, operational methods, and procedures for disclosing interest and fee information in personal loan business within the existing regulatory framework. They require lenders to present borrowers with a clear statement of comprehensive financing costs, transparently disclose personal loan interest and fee costs, and ensure that all costs are “sunshine” and “transparent,” better safeguarding the legitimate rights and interests of financial consumers.

Implementing Clear Disclosure of Comprehensive Financing Costs

Regarding the comprehensive financing costs of personal loans, the Regulations explicitly define these as all interest and fee-related costs borne by the borrower, including but not limited to loan interest, installment fees, credit enhancement service fees, and normal performance costs, as well as potential costs such as late payment penalties in case of default. Lenders should determine the annualized level of comprehensive financing costs reasonably and in accordance with laws and regulations.

The Regulations require that when conducting personal loan business, lenders must display a clear statement of comprehensive financing costs to borrowers. This statement should specify the principal amount of the loan, itemize all interest and fee items charged by the lender and its partners, including the collection methods, standards, and responsible parties. Based on this, the annualized comprehensive financing cost borne by the borrower under normal performance conditions should be calculated comprehensively.

Luo Feipeng, a researcher at China Postal Savings Bank, analyzed for reporters: “From the perspective of various institutions, cost transparency will promote industry competition from marketing gimmicks to real interest rates and services. Banks’ capital cost advantages will become more prominent, helping to expand market share. Consumer finance companies need to optimize risk control models to reduce overall costs, as high-interest products will lose competitiveness. Small loan companies will face greater impact, possibly accelerating industry consolidation. Overall, interest rates are moving toward rationalization, with service quality and risk control capabilities becoming core competitive advantages.”

“Long-term, compliance is a strategic opportunity to build trust assets,” said Tian Lihui, a finance professor at Nankai University, in an interview. He emphasized that financial institutions need to focus on three major directions: First, accelerate system and process reforms to meet regulatory requirements, completing full-process modifications such as online and offline disclosure displays and mandatory reading setups by August 1, 2026; second, thoroughly review partner institutions, conduct compliance checks on loan aid platforms, guarantee companies, and other partners, clarify responsibilities, establish early warning and exit mechanisms, and prevent risks of “loss of control” among cooperative institutions; third, promote refined operational transformation by using technology to reduce customer acquisition costs, improve risk control accuracy, and build differentiated service capabilities based on transparent pricing.

Strengthening Management of Cooperative Institutions

Management of cooperative institutions is also a key focus. The Regulations specify that loan agreements with cooperative institutions must clearly define each party’s responsibilities and obligations regarding the implementation of comprehensive financing cost disclosures. Lenders need to strengthen full-process management of cooperative institutions, promptly take corrective actions against violations or breaches, and in serious cases, terminate cooperation, seek legal recovery of losses, and pursue legal liabilities to effectively prevent cooperation risks.

Regarding the implementation of the new regulations, Luo Feipeng believes that financial institutions should focus on three aspects: first, the calculation scope of comprehensive financing costs and ensuring all relevant interest and fee items are included; second, strictly adhere to information display standards across different business scenarios to ensure accuracy and compliance; third, set mandatory reading times and clearly disclose costs such as late payment penalties to safeguard consumers’ right to know.

The Regulations will come into effect on August 1, 2026. Moving forward, the National Financial Regulatory Administration and the People’s Bank of China will deepen the practice of financial serving the people, strengthen coordination between central and local regulators, guide the implementation of policies, and aim to effectively protect the legitimate rights and interests of financial consumers, providing strong financial support for high-quality economic and social development.

Regarding the industry impact of the new regulations, Tian Lihui believes they will feature “short-term pain and long-term reshaping.” In the long run, the industry will undergo three major transformations: first, business models will shift from “information asymmetry arbitrage” to “technology-driven cost reduction and efficiency enhancement”; second, competition will move from “front-end customer acquisition” to “comprehensive services covering the entire cycle”; third, the industry ecosystem will evolve from “blurred responsibilities” to “transparent regulation with clear rights and responsibilities.”