China mandates clear disclosure of personal loan financing costs

China's financial regulators, the NFRA and PBOC, have introduced new Provisions to combat a lack of transparency in the personal loan market.

The regulations aim to protect financial consumers from hidden fees and irregular practices that have led to disputes and undermined policy effectiveness.

The Provisions mandate clear disclosure of all financing costs, encompassing loan interest, installment fees, credit enhancement service fees, and contingent charges like overdue penalties.

This ensures borrowers fully understand cost items, collection methods, annualized rates, and breach of contract liabilities.

Disclosure forms must itemize all lender and partner institution charges, including collection standards and entities, and calculate the annualized overall financing cost under normal contract performance.

Operational requirements for disclosure vary by channel.

In-person loans require a signed confirmation form, while online loans necessitate a pop-up window with mandatory reading time and borrower confirmation.

For online consumption, cost information must be prominently displayed on the payment page.

Lenders are also required to strengthen management of third-party partners involved in loan business, ensuring their compliance with disclosure rules and defining responsibilities in cooperation agreements.

The annualized overall financing costs must be calculated using the internal rate of return method.

These new rules will take effect on August 1, 2026, applying a grandfathering approach to new business.