Personal Loan Comprehensive Financing Cost to Be Clearly Disclosed to Borrowers

According to the website of the National Financial Regulatory Administration on March 15, 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, in conjunction with the People’s Bank of China, has formulated the “Regulations on the Disclosure of Comprehensive Financing Costs for Personal Loan Business.” The regulations will come into effect on August 1, 2026. Under the principle of “new and old separation,” new businesses must strictly follow the requirements of the regulations to disclose comprehensive financing costs.

The regulations address issues of non-compliance and lack of transparency in the disclosure of interest and fee information for personal loans. They specify the scope and procedures for disclosing interest and fee information, clarify responsibilities of all parties, strengthen supervision, and promote the use of a “Personal Loan Comprehensive Financing Cost Disclosure Form.” This aims to make all interest and fee information transparent and clear, better protect the rights of financial consumers, facilitate the implementation of financial惠民 policies, and promote healthy industry development.

Full Coverage of Interest and Fee Items

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, issues of non-compliance and opacity in interest and fee disclosures have emerged, which can lead to financial disputes, affect the effectiveness of interest rate policies, and weaken the quality of financial services to the real economy. Therefore, it is necessary to establish relevant regulatory rules.

Officials from the Financial Regulatory Administration and the People’s Bank of China stated in response to questions that to accurately and comprehensively reflect the actual financing costs borne by borrowers in personal loans, the regulations will include all related costs, such as but not limited to loan interest, installment fees, credit enhancement service fees, and, in case of default, late payment penalties and potential costs. Borrowers should pay attention to the comprehensive financing costs when applying for personal loans, fully understanding the items, collection methods, standards, annualized rates, responsible entities, and default responsibilities involved.

The regulations also emphasize full coverage of lenders. “Lenders” refer to 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 institutions and local financial organizations. “Partner institutions” are third-party entities that cooperate with lenders in marketing, customer acquisition, guarantees, and credit enhancement.

Implementation of the “Personal Loan Comprehensive Financing Cost Disclosure Form”

The regulations specify that when conducting personal loan business, lenders must present a comprehensive financing cost disclosure form to borrowers. This form should specify the principal amount and itemize all interest and fee items charged by the lender and its partner institutions, including collection methods, standards, and responsible entities. It should also calculate the annualized comprehensive financing cost for normal performance scenarios. Additionally, it must list potential costs and their standards and responsible entities in cases of default, such as overdue or misappropriated funds. The interest and fee standards for normal performance should be converted into annualized rates according to the requirements of the “People’s Bank of China Announcement.” The form must also clearly state that, aside from the disclosed items, no other interest or fees related to the loan will be charged.

For on-site personal loan processing, borrowers must sign and confirm the disclosure form before signing the loan agreement or initiating installment payments. For online applications, the disclosure form should be displayed via a pop-up window with a mandatory reading period, and the borrower must confirm before signing the loan agreement or proceeding with installments. In online consumer scenarios, the form should be prominently and clearly displayed on the payment page, including details of the principal, installment plan, service fees, responsible entities, and the annualized comprehensive financing cost under normal performance, as well as potential costs in default scenarios.

Both the disclosure form and the online payment page must clearly state that, aside from the disclosed costs, no other interest or fees will be charged by the lender or its partner institutions.

Strengthening Management of Partner Institutions

Officials from the Financial Regulatory Administration and the People’s Bank of China emphasized that to promote standardized disclosure of comprehensive financing costs, relevant departments have developed sample disclosure forms and online payment pages illustrating the costs. They will also guide industry associations such as the China Banking Association, China Internet Finance Association, and the Market Interest Rate Pricing Self-Discipline Mechanism to enhance industry self-regulation and support the implementation of these requirements.

Furthermore, the regulations require lenders to clearly disclose the maximum comprehensive financing cost for personal loans under normal performance at their business locations and official websites. For on-site processing, borrowers must sign the disclosure form before signing the loan agreement or initiating installments. For online processing, the disclosure must be shown via a pop-up with a mandatory reading period, and confirmation is required before proceeding.

It is important to note that the regulations are aligned with other policies, such as the “Notice on Strengthening the Management of Internet Loan Assistance Business by Commercial Banks,” requiring lenders to strengthen management of marketing, customer acquisition, and guarantee partner institutions. Cooperation agreements should specify responsibilities for implementing the comprehensive financing cost disclosure requirements. Lenders must monitor partner institutions’ compliance, take corrective actions for violations, and, in serious cases, consider terminating cooperation.