Finance Lao Wang | New Regulations Released - Personal Loans Will Not Be Allowed Hidden Fees

Have you ever experienced signing a loan agreement that only listed a 6% annual interest rate, but later found out there were a bunch of unexpected charges like guarantee fees, service fees, consulting fees, and more…To address these irregular practices, the Financial Regulatory Authority and the People’s Bank of China announced new regulations on the 15th, requiring all personal loans to clearly disclose the total cost of financing, so consumers can understand clearly.

The new rules especially focus on protecting consumers’ right to information and provide clear guidance for actual operations.

The term “total cost of financing” sounds technical, but it simply refers to the sum of all interest and related fees associated with your loan. The regulations specify that interest, installment fees, and credit enhancement fees during guarantee processes must be clearly displayed. If you fail to repay on time, any late payment penalties or other potential fees must also be disclosed in advance. This way, you can see all the costs involved before taking out the loan.

According to the new regulations, before issuing a loan, banks and other institutions must include all related charges in the comprehensive financing cost disclosure form, confirm with the borrower that these are the only fees, and ensure there are no hidden charges.

How to ensure proper implementation?

• When applying for a loan in person, the borrower must sign the comprehensive financing cost disclosure form;
• For online applications, a pop-up must forcefully display the disclosure form with a countdown to ensure the consumer reads and understands it;
• For installment payments in online consumption scenarios, the payment page must clearly show installment fees, penalty charges, and other relevant information.

What if the other party claims this regulation only applies to financial institutions, such as intermediaries, and not to them? Don’t believe it! This includes banks, microloan companies, online lending platforms, loan assistance agencies, and all organizations involved in lending activities—they are all required to comply with this regulation.

Considering that institutions need time to update their systems, the new rules will officially take effect on August 1st of this year.

Reminder: Before applying for a personal loan under the new regulation, ask questions and clarify all fees to protect your right to information.

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