Starting August 1st, personal loan interest and fees will be clear at a glance and displayed in a single format.

On March 15, the National Financial Regulatory Administration and the People’s Bank of China jointly issued the “Regulations on Clear Disclosure of Personal Loan Business and Comprehensive Financing Costs” (hereinafter referred to as the “Regulations”). The Regulations stipulate that when lenders conduct personal loan business, they should present borrowers with a “Clear Disclosure Table of Comprehensive Financing Costs” (hereinafter referred to as the “Disclosure Table”). The Regulations will come into effect on August 1 of this year.

The Regulations specify that the comprehensive financing cost of personal loan business refers to all interest and fee expenses borne by the borrower related to the loan, including but not limited to loan interest, installment fees, credit enhancement service fees, normal performance costs, as well as potential costs such as late payment penalties and default-related charges. Lenders should reasonably determine the annualized level of comprehensive financing costs in accordance with laws and regulations.

“The Regulations aim to address issues of non-standard and non-transparent disclosure of interest and fee information in personal loan business, better protect the legitimate rights and interests of financial consumers, facilitate the smooth transmission of financial benefit policies, and promote industry standardization and healthy development,” said the People’s Bank of China. The Regulations refine the scope, operational methods, and procedures for interest and fee disclosure within the existing regulatory framework, requiring lenders to display the “Disclosure Table” to clearly disclose personal loan costs, effectively ensuring the implementation of interest and fee disclosure requirements.

The “Disclosure Table” makes personal loan costs clear at a glance

The Regulations define the financial institutions required to provide borrowers with a “Disclosure Table,” including commercial banks, rural cooperative banks, rural credit cooperatives, auto finance companies, consumer finance companies, corporate group finance companies, trust companies, microloan companies, and other financial organizations and local financial entities.

On the “Disclosure Table,” lenders should specify the principal amount of the loan, itemize all interest and fee items charged by the lender and its partners, including their collection methods, standards, and responsible entities. Based on this, the annualized comprehensive financing cost borne by the borrower under normal performance conditions should be calculated comprehensively.

Additionally, lenders must itemize potential costs and their standards and responsible entities in cases of default, such as overdue or misappropriation. The fee standards for each item under normal performance should be converted into annualized levels as required.

The Regulations emphasize that the “Disclosure Table” should clearly indicate that, apart from the costs already disclosed, lenders and their partners will not charge any other interest or fee related to the loan. If changes occur due to adjustments in interest rate benchmarks or promotional activities, relevant institutions should promptly inform the borrower.

In recent years, there have been numerous complaints from borrowers about opaque charges and excessively high comprehensive costs charged by financial institutions and lending platforms. Some complainants reported discovering high guarantee fees and other charges after taking out loans, leading to disputes.

Dong Ximiao, Chief Economist of Zhaolian and Deputy Director of the Shanghai Financial and Development Laboratory, stated that this means lenders must clearly display the composition of the total loan cost. The focus of disclosure should be on non-interest costs, including but not limited to mortgage fees, guarantee fees, insurance fees, matchmaking service fees, intermediary service fees, and membership rights fees.

All scenarios require disclosure; online installment payments must be clearly shown on the order payment page

The Regulations also specify detailed disclosure requirements for various scenarios.

Regarding the highly watched online consumer installment business, the Regulations clarify that relevant lenders must prominently display on the payment page the principal amount, installment plan, service fees charged, responsible entities, the annualized comprehensive financing cost under normal performance, and potential costs and standards in case of default. It should also be clearly indicated that no other interest or fees will be charged beyond those already disclosed.

Online consumer installment plans have become popular in recent years, but many only display the monthly repayment amount before installments or omit details about service fees and guarantee fees, misleading consumers into believing the repayment amount is lower, which can result in actual costs exceeding 24%. Dong Ximiao pointed out that requiring relevant institutions to disclose costs at the point of payment will help consumers better understand installment costs and make rational decisions about whether to choose installment plans.

Furthermore, the Regulations specify that lenders should clearly disclose the maximum personal loan comprehensive financing cost in their physical outlets and official websites. For on-site personal loan applications, borrowers must sign the “Disclosure Table” confirming the disclosed costs before signing the loan agreement or proceeding with installment plans.

For online personal loan applications, lenders should display the “Disclosure Table” via pop-up windows, with mandatory reading time, and require borrowers to confirm before signing the loan contract or proceeding with installments.

Partner institutions must also implement the disclosure of comprehensive financing costs

Implementing the disclosure of comprehensive financing costs is not solely the responsibility of lenders. The Regulations specify that in cooperation agreements, lenders should clearly define the responsibilities and obligations of all parties regarding the disclosure requirements. Lenders should strengthen management of partner institutions, promptly correct violations, and, in serious cases, terminate cooperation, seek legal remedies, and pursue legal responsibility.

It is important to note that “partner institutions” include third-party organizations involved in marketing, customer acquisition, guarantee, and credit enhancement activities related to personal loans.

In practice, various loan assistance platforms are key channels for lenders to acquire customers, but these channels are also hotspots for complaints about excessively high interest rates and opaque costs.

Dong Ximiao emphasized that the scope of disclosure for personal loan comprehensive financing costs should primarily cover internet loans, including personal loans offered through cooperation between financial institutions and loan assistance platforms, as well as personal loan products launched on internet platforms. Including third-party organizations involved in cooperation aims to extend disclosure coverage across the entire personal loan business chain, ensuring better implementation of the disclosure requirements.

Borrowers should pay attention to costs to avoid over-indebtedness; choose正规渠道 for loans

The Regulations also clarify that borrowers should reasonably assess their income and debt capacity when applying for personal loans, avoid over-indebtedness, and choose正规渠道 (formal channels) for borrowing.

As financial consumers, borrowers are advised to pay attention to the comprehensive financing costs, fully understand the cost items, collection methods, standards, annualized levels, responsible entities, and default liabilities.

“Borrowers should actively inquire about the annualized comprehensive financing cost when applying for a personal loan and request detailed explanations of all fees,” said Dong Ximiao. Borrowers should carefully review the “Disclosure Table,” confirm its accuracy before signing, and avoid unnecessary losses.

Additionally, Dong Ximiao reminded borrowers to prefer reputable financial institutions such as commercial banks and consumer finance companies. For loan products recommended by internet platforms or loan intermediaries, they should remain cautious, especially regarding guarantee fees, service fees, and other non-interest expenses.

Beijing News Shell Finance Reporter Jiang Fan, edited by Chen Li, proofread by Jia Ning.