Interest Fee Transparency! New Regulations Implemented by Two Departments: Personal Loans Will Be Forced to Display "True Cost Statements"

On the evening of March 15, the State Administration of Financial Supervision and the People’s Bank of China jointly issued the “Regulations on Clear Disclosure of the Total Cost of Personal Loan Business” (hereinafter referred to as the “Regulations”). The core aim is to address the issues of non-transparent and unstandardized disclosure of interest and fee information in personal loans. The Regulations require lenders to provide borrowers with a clear and straightforward “Total Cost Disclosure Form,” listing each interest and fee item charged by the lender and its partners, including charging methods and standards. This allows borrowers to grasp the loan costs at a glance, helping them make rational decisions and understand their expenses. Experts believe that this “transparent loan” model can create a stable, compliant development environment for financial institutions and achieve a win-win situation for both financial consumers and institutions.

Interest and fee disclosures are no longer “clouded in fog”

On the night of March 15, a significant regulatory signal was released! The Regulations stipulate that lenders must provide borrowers with a clear “Total Cost Disclosure Form,” listing each interest and fee item charged by the lender and its partners, including charging methods, standards, and responsible entities. This enables borrowers to understand the loan costs comprehensively, aiding rational decision-making and protecting consumers’ right to information and choice.

Officials from the relevant departments of the State Administration of Financial Supervision and the People’s Bank of China stated in response to reporters that in recent years, China’s personal loan market has developed rapidly, playing a positive role in promoting personal consumption, business operations, and supporting steady and healthy economic growth. However, there have been issues with non-standard and opaque disclosure of interest and fee information, which can lead to consumer disputes, affect the effectiveness of interest rate policies, and weaken the quality of financial services to the real economy. It is necessary to formulate and implement regulatory rules to clarify the scope, procedures, and responsibilities related to interest and fee disclosures, better protect consumers’ legal rights, facilitate the implementation of financial policies benefiting the people, and promote industry regulation and healthy development.

According to the Regulations, the total cost of personal loans refers to all interest and fees borne by the borrower related to the loan, including but not limited to interest, installment fees, credit enhancement service fees, and potential costs under default scenarios such as late payment penalties. Lenders should reasonably determine the annualized level of the total financing cost in accordance with laws and regulations.

Specifically, when conducting personal loan business, lenders must display the Total Cost Disclosure Form to borrowers. The form should specify the principal amount and itemize each interest and fee charged by the lender and its partners, including charging methods, standards, and responsible entities. Based on this, the normal annualized total financing cost borne by the borrower should be calculated comprehensively. Additionally, the form should clearly list potential costs and their standards and responsible entities in cases of default, such as late payments or misappropriation.

Regarding the new regulations, Wang Hongying, President of the China (Hong Kong) Financial Derivatives Investment Research Institute, stated that the new rules precisely target the chaos in internet lending. Future supervision may include stricter penalties to crack down on some illegal financial institutions and lending platforms that exploit information asymmetry to hide total financing costs and infringe on consumer rights. Currently, the country is vigorously promoting economic internal circulation and boosting consumption. However, some institutions violate policy guidance by deliberately hiding costs such as installment fees, credit enhancement fees, and information service fees, only advertising low nominal interest rates, while the actual total costs remain high. This not only harms consumers but also hampers the implementation of policies to boost consumption. The new regulations close regulatory loopholes at the systemic level, which is significant for standardizing the market and ensuring policy effectiveness.

“These regulations send a clear signal of strengthening supervision in the financial sector. By requiring transparent disclosure of total costs, they further protect the rights of financial consumers and ensure stronger safeguards under the new regulatory framework,” Wang Hongying emphasized.

Booth Consulting Chief Analyst Wang Pengbo interpreted from the perspective of regulatory continuity that, in fact, regulators have previously issued multiple requirements regarding interest and fee disclosures and annualized interest rate transparency. The release of specific regulations at this key “3.15” point consolidates and reinforces previous supervisory demands. This move signals a continued effort to rectify chaos in the personal loan market and to hold institutions accountable for information disclosure. It aims to unify previously scattered regulatory requirements into a consistent standard, promoting transparent pricing and compliant operation of personal loans, and further improving market regulation.

Coverage of three business scenarios

In terms of operational requirements, the Regulations stipulate that for on-site personal loan transactions, borrowers must sign and confirm the Total Cost Disclosure Form before signing the loan agreement or proceeding with installment payments. For online personal loans, the form must be displayed via a pop-up window, with a mandatory reading period, and confirmed by the borrower before signing the agreement or proceeding with installments. For installment payments in online consumption scenarios, the relevant information must be clearly displayed on the payment page.

Furthermore, the Regulations emphasize that both the Total Cost Disclosure Form and the online payment pages for installment transactions must clearly indicate that, aside from the disclosed costs, lenders and their partners will not charge any other interest or fees related to the loan. If costs change due to adjustments in interest rate benchmarks or promotional activities, lenders must notify borrowers promptly.

From the perspective of regulatory focus, Dong Ximiao, Chief Economist at Zhaolian and Deputy Director of the Shanghai Financial and Development Laboratory, pointed out that most personal loans issued by formal financial institutions such as commercial banks and consumer finance companies have relatively low and transparent interest and non-interest costs. Therefore, the focus of the disclosure should be on internet loans, including personal loans offered through cooperation between financial institutions and lending platforms, as well as internet-based personal lending products. Overall, internet lending involves many participants, complex fee structures, and significant opacity, making it a key area for “penetration” and disclosure. 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 fees, and membership rights fees.

Regarding operational details and core breakthroughs of the new regulations, Wang Pengbo noted that compared to previous disclosures of nominal interest rates, the core advancement of the new regulations is to include all relevant costs in the calculation of the annualized total financing cost, achieving full coverage of interest and fee items and standardizing cost calculations. This effectively closes loopholes that allow institutions to split or hide true costs, making loan costs comparable and verifiable, and promoting more transparent pricing mechanisms. Moreover, these procedural designs put the previously emphasized obligation to inform into an actionable and traceable operational level, which is very important. It can force institutions to reduce the problem of consumers unknowingly taking out loans and being charged extra fees, thereby strengthening consumers’ right to know and make autonomous decisions.

Wang Hongying believes that, in the past, due to some consumers’ limited financial knowledge, they often only paid attention to the nominal annualized interest rate displayed on the page, which is usually around 5%, 6%, or even as low as 3%. They mistakenly thought they were enjoying low-interest benefits, but in reality, many loan contracts concealed additional costs such as information fees, membership fees, and installment fees, resulting in actual interest rates far higher than the surface rate, trapping consumers in deceptive borrowing traps. The new regulations’ clear reading and signing process can legally safeguard consumer rights; the mandatory reading requirement also encourages borrowers to carefully review relevant legal provisions and actively protect their interests.