China Regulates Small Loan Companies New Draft for Comment and Key Provisions

TapTechNews August 23rd news, as of the end of 2023, there are 6,550 legal person institutions of small loan companies in China, with a loan balance of 843.1 billion yuan. Among them, there are 179 online small loan companies, with a loan balance of 17.39 billion yuan; the leading online small loan companies have outstanding advantages in funds, technology, operation and management, etc.

In order to regulate the behavior of small loan companies and strengthen supervision and management, the National Financial Regulatory Administration has studied and formulated the 'Interim Measures for the Supervision and Management of Small Loan Companies (Draft for Comment)' (hereinafter referred to as the 'Draft for Comment' by TapTechNews), and officially solicits public opinions today.

The public can put forward feedback opinions through the following channels and methods:

1. Send opinions via email to: songcan_a@cbirc.gov.cn, and please indicate 'Comments on the Interim Measures for the Supervision and Management of Small Loan Companies' in the email subject.

2. Send opinions by letter to:普惠金融司, National Financial Regulatory Administration, No. 15 Jinrong Street, Xicheng District, Beijing (100033), and please indicate 'Comments on the Interim Measures for the Supervision and Management of Small Loan Companies' on the envelope.

The deadline for feedback is September 23, 2024.

The Draft for Comment strengthens the regulatory constraints on the business concentration of small loan companies, stipulating that the loan balance of a small loan company to the same borrower shall not exceed 10% of its net assets, and the loan balance to the same borrower and its affiliated parties shall not exceed 15% of its net assets.

For online small loan companies, the Draft for Comment requires that the loan balance for a single household for consumption shall not exceed 200,000 RMB, and the loan balance for a single household for production and operation shall not exceed 10 million RMB. In addition, the Draft for Comment also stipulates that the contract must be converted into an annualized interest rate, and prohibits upfront fees and other provisions.

For online small loan companies, it emphasizes the use of an independent business system and should meet the conditions of the whole process of online operation, a sound risk prevention and control system, and compliance with the requirements of network and information security management.

The Draft for Comment proposes that small loan companies should gradually meet the requirements of all provisions of this measure within the transition period stipulated by the provincial local financial management agency. The transition period does not exceed one year, and the transition period for the upper limit of 10 million RMB of single-household production and operation loans of online small loan companies does not exceed two years.

In other aspects, the Draft for Comment strictly prohibits small loan companies from renting and lending licenses and other illegal 'channel' businesses, and requires that they not use the advance deposit and other funds of cooperative institutions to lend, not carry out joint loans with institutions without lending qualifications, and not transfer credit assets to institutions without lending qualifications.