Personal Loan Interest and Fee Chaos Welcome New Regulatory Rules: Comprehensive Financing Cost Will Be "Clearly Shown in One Table" Taking Effect from August 1st

Personal loan interest and fee charges will become more “sunshine” and transparent.

On March 15, the National Financial Regulatory Administration and the People’s Bank of China jointly issued the “Regulations on Clear Disclosure of Total Financing Costs for Personal Loan Business” (hereinafter referred to as the “Regulations”), detailing the scope and procedures for disclosing interest and fee information for personal loans, clarifying responsibilities of all parties, and strengthening supervision and management. The Regulations will take effect on August 1, 2026.

Relevant officials stated that the chaos in personal loan interest and fee disclosures is caused by complex factors, including inadequate and non-standard disclosure, and insufficient protection of consumers’ right to know, which are key reasons for the disorder. The Regulations promote the use of a “Personal Loan Total Financing Cost Disclosure Table,” truly making all interest and fee charges for personal loans “sunshine” and transparent, better safeguarding the legitimate rights and interests of financial consumers, smoothing the channels for financial policies to benefit the public, and promoting industry regulation and healthy development.

The “Regulations” define personal loans as loans issued by lenders to qualified natural persons for personal consumption, production, and business purposes, in accordance with the “Personal Loan Management Measures,” in foreign or domestic currency. The total financing cost of personal loan business refers to all interest and fee charges 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 under default situations such as late payment penalties. Lenders should reasonably determine the annualized level of the total financing cost in accordance with laws and regulations.

According to officials, the “Regulations” emphasize four principles: full coverage of interest and fee items, comprehensive coverage of all lending institutions, single-table display, and pre-disclosure and confirmation. All interest and fee items, including loan interest, installment fees, credit enhancement service fees, late payment penalties, and default penalties, are included in the total financing cost, applicable to banks, consumer finance companies, auto finance companies, trust companies, micro-lenders, and other lending institutions.

The Regulations require that when conducting personal loan business, lenders must present a clear disclosure table of the total financing cost to the borrower. The table should specify the principal amount, itemize all interest and fee items charged by the lender and its partners, including the charging method, standard (converted to an annualized level), and the charging entity. Based on this, the normal performance scenario’s annualized total financing cost borne by the borrower should be calculated. Additionally, the table should list potential costs and their standards and entities under default situations such as late payments or misappropriation. Beyond the costs already disclosed, lenders and their partners shall not charge any other interest or fees related to the loan.

The Regulations also require lenders to clearly disclose the maximum limit of the personal loan total financing cost in their business premises, official websites, and other channels.

Depending on the loan scenario, the Regulations stipulate that for on-site personal loan processing, borrowers must sign and confirm the disclosure table of total financing costs before signing the loan agreement or installment agreement. For online personal loan processing, the disclosure table must be displayed via a pop-up window, with a mandatory reading period, and the borrower must confirm before signing the loan or installment agreement. For online installment payments in consumer scenarios, relevant information about total financing costs must be prominently and clearly displayed on the payment page.

Regarding cooperation management, the Regulations specify that the cooperation agreement between the lender and its partners must clearly define responsibilities and obligations for implementing the disclosure of total financing costs. Lenders should strengthen management of their partners, promptly correct violations or breaches, and in serious cases, take measures such as terminating cooperation, legally pursuing damages, and pursuing legal responsibility.

At the same time, the Regulations require borrowers to reasonably assess their income and debt capacity when applying for personal loans, avoid over-indebtedness, and choose formal channels for borrowing. Borrowers should also pay attention to the total financing costs, fully understand the items, methods, standards, annualized levels, responsible entities, and default liabilities related to the financing costs.

Officials from the Financial Regulatory Administration and the People’s Bank of China stated that to promote standardized disclosure of total financing costs, they have organized the creation of sample disclosure forms and online installment payment pages with example disclosures. They will also guide industry associations such as the China Banking Association, China Internet Finance Association, and market interest rate self-regulation mechanisms to leverage industry self-discipline and support the implementation of these requirements.

“Considering that lenders need to adjust business processes, systems, and modify cooperation agreements, the Regulations will be implemented from August 1, 2026,” said the official. Relevant entities should prepare accordingly in accordance with the Regulations. When the Regulations come into effect, the “new-old” principle will be applied, and new business activities must strictly follow the disclosure requirements for total financing costs.