The loan market meets the new regulation again. On March 31, the official website of the people’s Bank of China issued announcement No. 3 of 2021, which proposed that in order to maintain the order of competition in the loan market and protect the legitimate rights and interests of financial consumers, all loan products should clearly indicate the annualized interest rate, and encourage private lending to follow the announcement.
According to the announcement of the central bank, all institutions engaged in loan business, when marketing through websites, mobile applications, posters and other channels, should show borrowers the annualized interest rate in an obvious way, which should be stated when signing the loan contract, and can also display daily interest rate, monthly interest rate and other information as needed, but it should not be more obvious than the annualized interest rate.
According to the announcement, institutions engaged in loan business include but are not limited to deposit financial institutions, auto finance companies, consumer finance companies, micro loan companies and Internet platforms that provide advertising or display platforms for loan business.
According to Su Xiaorui, an expert in consumer finance, this announcement is an important measure to strengthen the management of Internet loan business. Previously, some financial institutions and Internet platforms did not disclose or disclosed less loan interest rates or induced behavior in the process of industry exhibition, which is suspected of infringing the legitimate rights and interests of financial consumers and is not conducive to the healthy development of the consumer financial market.
Sun Yang, director of the financial technology research center of Suning Financial Research Institute, told Beijing Business Daily that at present, some institutions in the market only display daily interest rate, monthly interest rate and other interest rates, and do not provide a clear calculation method of annual interest rate. In fact, it is very easy to mislead consumers.
In addition to requiring the annualized interest rate of loans to be clearly stated, the reporter of Beijing business daily noted that the central bank also mentioned the calculation method of annualized interest rate of loans in the announcement. The annualized interest rate of loans can be calculated by compound interest or simple interest method, and the compound interest is calculated by annualized internal rate of return (IRR). The announcement also shows the calculation methods of three kinds of loan products, including one-time repayment of principal and interest, installment repayment and charging products.
According to the announcement, the annualized interest rate of the loan should be calculated in the proportion of all the loan costs charged to the borrower and the loan principal actually occupied, and converted into annualized form. Among them, the loan cost should include interest and various expenses directly related to the loan. The principal of the loan shall be specified in the loan contract or other credit documents. If the method of repayment of principal by installments is adopted, the loan principal actually occupied should be calculated based on the remaining principal after each repayment.
Su Xiaorui said that this move made clear the loan cost that users need to bear when borrowing. The example provided by the central bank also included the service fee, which can effectively prevent financial institutions from charging various fees in various names in disguise and increase the hidden cost of borrowers. At the same time, the central bank also unifies the calculation method of loan interest rate, which can also provide effective reference for institutions in the follow-up practice.
Su Xiaorui said that the regulatory move aims at starting from the financial marketing publicity link and unifying the disclosure method of loan interest rate, which can not only curb financial institutions from taking advantage of improper publicity loopholes to implement vicious competition, but also protect financial consumers’ right to know, which is conducive to promoting healthy competition in the consumer financial market in the long run.
Sun Yang further said that in addition to standardizing financial marketing, the new rules will further promote the automation of financial technology robot process and the application of risk control model. At present, the cost of risk control data, channel customer acquisition and back office operation of various institutions are mostly allocated into the annual interest rate of loans borne by users in the name of margin, guarantee fee and credit insurance premium. In order to further reduce the cost of loans, institutions will promote the further online and automated loan business.
Beijing Business News (reporter Yue Pinyu, Liao Meng)
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