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

Our reporter Li Bing

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 within the existing framework of loan information disclosure regulation to specify the scope, operational methods, and procedures for disclosing interest and fee information for personal loans. They require lenders to present a clear comprehensive financing cost disclosure form, transparently disclose personal loan interest and fee costs, and ensure that all personal loan costs are “sunlighted” and transparent, better safeguarding the legitimate rights and interests of financial consumers.

Implementing the Clear Disclosure of Comprehensive Financing Costs

Regarding the comprehensive financing costs of personal loans, the Regulations clearly define that these include all interest and fee-related costs borne by the borrower, such as but not limited to loan interest, installment fees, credit enhancement service fees, and normal performance costs, as well as potential costs under default scenarios like late payment penalties. 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 comprehensive financing cost disclosure form to borrowers. This form 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 form should also calculate the annualized comprehensive financing cost under normal repayment conditions.

Luo Feipeng, a researcher at China Postal Savings Bank, analyzed for reporters: “From the perspective of institutions, cost transparency will promote industry competition to shift from marketing gimmicks to real interest rates and service quality. 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-rate products will lose competitiveness. Small loan companies will face greater impact, potentially accelerating industry consolidation. Overall, interest rates are moving toward rationality, with service quality and risk control capabilities becoming core competitive factors.”

“Long-term, compliance is a strategic opportunity for building trust assets,” said Tian Lihui, a finance professor at Nankai University, in an interview. He emphasized three key directions for financial institutions: First, accelerate system and process reforms to meet regulatory requirements, completing full-process modifications such as online and offline disclosure displays and mandatory reading by August 1, 2026; second, thoroughly review partner institutions, conduct compliance checks on loan aid platforms, guarantee companies, and others, clarify responsibilities, establish early warning and exit mechanisms, and prevent risks of “partner mismanagement”; 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 Partner Institutions

Management of partner institutions is also a key focus. The Regulations specify that loan agreements with partner institutions must clearly define responsibilities and obligations regarding the implementation of comprehensive financing cost disclosures. Lenders need to strengthen full-process management of partner institutions, promptly correct violations or breaches, and in serious cases, terminate cooperation, seek legal recovery of losses, and hold legal liabilities to 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 breach costs such as late payment penalties to protect consumers’ right to know.

The Regulations will officially take 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 policy implementation, 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 it will feature “short-term pain and long-term reshaping.” In the long run, the industry will undergo three major transformations: first, shifting from “information asymmetry arbitrage” to “technology-driven cost reduction and efficiency enhancement”; second, competition will move from “front-end customer acquisition” to “comprehensive service capabilities covering the entire cycle”; third, the industry ecosystem will evolve from “blurred responsibilities” to “transparent regulation with clear rights and obligations.”