Consumer grievances over being trapped by "usury loans," "black online loans," and "chain loans" have been common in recent years.
In March of this year, the National Financial Regulatory Administration and the People's Bank of China jointly issued the Personal Loan Business Comprehensive Financing Cost Disclosure Regulation (hereinafter referred to as the "Regulation"), which took effect on August 1. The Regulation requires lenders to reasonably determine the annualized level of comprehensive financing costs according to laws and regulations. When conducting personal loan business, lenders must present borrowers with a comprehensive financing cost disclosure table, making personal loan interest and fees transparent.
Recently, with the implementation of the Regulation, banks, consumer finance companies, and other institutions have begun to disclose the comprehensive financing costs of personal loans. The Financial Times reporter noted that many small loan companies have also started to disclose the upper limits of comprehensive financing costs for personal loan business through official public accounts and other channels. Based on current disclosures, loan pricing among small loan companies is showing a clear divergence. Under normal borrower performance (on-time repayment, no overdue or misappropriation), some companies have capped the annualized comprehensive financing cost at 12%, while many others have set the upper limit at 24%.
For example, Dongguan Caiquan Small Loan Co., Ltd. stated that from August 1, all new personal loans issued will comply with comprehensive financing cost disclosure requirements. Under normal borrower performance, the maximum annualized comprehensive financing cost for personal loan business will not exceed four times the 1-year Loan Prime Rate (LPR), which is 12%. Additionally, Shenzhen Agricultural Products Small Loan Co., Ltd. and Changde Deyuan Small Loan Co., Ltd. have also controlled the upper limit of comprehensive financing costs for related loan business at four times the 1-year LPR.
Notably, many institutions have also set the annualized comprehensive financing cost upper limit at 24%. For instance, Hunan Tongcheng Small Loan Co., Ltd. and Xiamen Haixiang Small Loan Co., Ltd. have stated that under normal borrower performance, the maximum annualized comprehensive financing cost for personal loan business will not exceed 24%. Zhaoqing Duanzhou District Runze Small Loan Co., Ltd. has set the annualized comprehensive financing cost upper limit under normal borrower performance at 18%.
Based on these disclosures, small loan companies are increasingly bringing information such as loan interest rates, loan terms, and comprehensive financing costs to the forefront. In the past, some borrowers did not fully understand the actual cost of loans. With the disclosure of comprehensive financing costs, various fees will become more transparent, allowing borrowers to more intuitively understand the true cost of financing. This also helps the market form a clearer price comparison mechanism.
Why are the annualized comprehensive financing cost upper limits of 12% and 24% coexisting? In the view of industry insiders, this is essentially driven by the combined forces of regulatory policy guidance and industry transformation. In December 2025, the Small Loan Company Comprehensive Financing Cost Management Work Guidelines were issued, explicitly prohibiting the issuance of new loans with a comprehensive financing cost exceeding 24% annually. It requires gradually reducing the comprehensive financing cost of new loans to within four times the 1-year LPR. Recently, the Shandong Provincial Local Financial Administration stated in response to related inquiries that the "Small Loan Company Comprehensive Financing Cost Management Work Guidelines" require that "in principle, by the end of 2027 at the latest, the comprehensive financing costs of small loan companies should be reduced to within four times the 1-year LPR."
"The significant gap in pricing between the two stems fundamentally from differences in funding costs, customer base, and business models," said Xue Hongyan, a special researcher at Sushang Bank, in an interview with a reporter. Some institutions can obtain lower-cost funds through asset securitization and other methods, serve higher-quality customer groups, and leverage digital operations to reduce costs, giving them the ability to compress financing costs to around 12%. However, other institutions have relatively limited funding sources and serve higher-risk clients, necessitating higher interest spreads to cover risk and operational costs, thus maintaining higher pricing.
In the view of industry insiders, after comprehensive financing costs become transparent, the development model of merely relying on high pricing to generate profits will face greater challenges. Xue Hongyan stated that in the future, institutions need to rely on scenario data and digital risk control to accurately identify risks and reduce bad debt losses, compress operational costs through full-process online and intelligent transformation, while simultaneously broadening funding channels and exploring diverse profit paths.