Measures for the Administration of Consumer Finance Companies

Measures for the Administration of Consumer Finance Companies

Order of the National Financial Regulatory Administration

(No. 4 [2024])

The Measures for the Administration of Consumer Finance Companies, as deliberated and adopted at the 4th 2023 Executive Meeting of the National Financial Regulatory Administration on December 4, 2023, are hereby issued and come into force on April 18, 2024.

Measures for the Administration of Consumer Finance Companies

Chapter I General Provisions

Article 1 For the purposes of strengthening the supervision and administration of consumer finance companies and promoting their well-regulated operation and high-quality development, these Measures are developed in accordance with the Company Law of the People's Republic of China, the Banking Supervision Law of the People's Republic of China, and other laws and regulations.

Article 2 For the purpose of these Measures, the term “consumer finance companies” means non-banking financial institutions which are established upon the approval of the National Financial Regulatory Administration (“NFRA”) for, instead of absorbing the deposit of the general public, providing consumption-oriented loans for resident individuals inside China under the principle of small amount and dispersion.

Article 3 For the purpose of these Measures, the term “consumption loans” means loans granted by consumer finance companies to borrowers for purposes of consumption (not for the purchase of residential properties and automobiles).

Article 4 A consumer finance company shall contain “consumer finance” in its name. Without the approval of the NFRA, no institution may use the term “consumer finance” in its name.

Article 5 The NFRA and its local offices shall supervise and administer consumer finance companies in accordance with the law.

Chapter II Formation and Modification

Article 6 A consumer finance company may be formed upon satisfaction of the following conditions:

(1) Having a bylaw that conforms to the Company Law of the People's Republic of China and the CBRC provisions.

(2) Having principal investors and ordinary investors that meet the prescribed requirements.

(3) The registered capital is paid-in monetary capital in a lump sum of a minimum of 1 billion yuan or equivalent in freely convertible currency.

(4) Having directors and officers qualified for holding their positions, competent employees that are familiar with the consumer finance business, and at least one person who has more than three years of relevant financial experience in each of risk management, financial management, credit management, and other key positions.

(5) Establishing effective corporate governance, internal control, and risk management systems.

(6) Establishing an information technology structure that meets business operations and regulatory requirements, having a necessary, secure, and compliant information system that supports business operations, and having technology and measures that guarantee continuous business operations.

(7) Having the business place, safety measures and other facilities required by its business operation.

(8) Other prudential conditions specified in the rules of the NFRA.

Article 7 The investors of a consumer finance company shall be corporate enterprises legally formed inside or outside China and include the principal investor and ordinary investors. The principal investor is the investor that holds not lower than 50% of the capital stock of the consumer finance company to be formed, and must be a domestic or overseas financial institution or a domestic non-financial enterprise whose main business is to provide products suitable for consumer loan business; an ordinary investor is an investor other than the principal investor.

Article 8 To be the principal investor of a consumer finance company, a financial institution shall satisfy the following conditions:

(1) It has more than five years of experience in consumer finance.

(2) Its total assets at the end of the last fiscal year shall be not lower than 500 billion yuan or equivalent in freely convertible currency.

(3) Its financial condition is good, and it has gained profits for the last two consecutive fiscal years.

(4) It has a good credit standing and has no gross violation of law or regulation in the last two years.

(5) The funds for equity investment are own funds, and no funds held on behalf of principal and debt funds, among others, shall not be used for equity investment.

(6) In principle, the balance of equity investment shall not exceed 50% of the enterprise's net assets (including the amount of this investment), unless the enterprise is an investment company or holding company specified by the State Council.

(7) It has a sound corporate governance structure, risk management mechanism, and internal control system.

(8) It has received a good regulatory rating.

(9) It meets the prudential regulatory requirements of the regulatory authority of the country or region where it is located.

(10) An overseas financial institution has sufficiently analyzed and researched the market of China, and the financial regulatory authority of the country or region where it is located has established a sound mechanism for cooperation in supervision and administration with the NFRA.

(11) Other prudential conditions specified in the rules of the NFRA.

To be an ordinary investor in a consumer finance company, a financial institution shall have a registered capital of not lower than 1 billion yuan or equivalent in freely convertible currency in addition to satisfying conditions listed in subparagraphs (3) through (9).

The financial indicator requirements in the preceding paragraph are all on a consolidated basis.

Article 9 To be the principal investor in a consumer finance company, a non-financial enterprise shall satisfy the following conditions:

(1) The revenue for the last fiscal year is not lower than 60 billion yuan or equivalent in freely convertible currency.

(2) The net assets at the end of the last fiscal year are not lower than 40% of the total assets.

(3) Its financial condition is good, and it has gained profits for the last three consecutive fiscal years.

(4) It has a good credit standing and has no gross violation of law or regulation in the last two years.

(5) The funds for equity investment are own funds, and no funds held on behalf of principal and debt funds, among others, shall not be used for equity investment.

(6) In principle, the balance of equity investment shall not exceed 40% of the enterprise's net assets (including the amount of this investment), unless the enterprise is an investment company or holding company specified by the State Council.

(7) Other prudential conditions specified in the rules of the NFRA.

To be an ordinary investor in a consumer finance company, a non-financial enterprise shall meet the following conditions in addition to the conditions in subparagraphs (4) and (5) of the preceding paragraph:

(1) The net assets at the end of the last fiscal year are not lower than 30% of the total assets.

(2) Its financial condition is good, and it has gained profits for the last two consecutive fiscal years.

(3) In principle, the balance of equity investment shall not exceed 50% of the enterprise's net assets (including the amount of this investment), unless the enterprise is an investment company or holding company specified by the State Council.

The financial indicator requirements in the preceding paragraph are all on a consolidated basis.

Article 10 A consumer finance company to be formed shall at least have one investor with more than five years of experience in consumer finance business management and risk control and holding not lower than one third of total equities of the company.

Article 11 If a consumer finance company contemplates any of the following modifications, it shall submit the modification for approval by the National Financial Regulatory Administration or its local office:

(1) Modification of name.

(2) Modification of registered capital.

(3) Modification of equity or adjustment of equity structure.

(4) Modification of domicile or business premise.

(5) Amendment of the bylaw.

(6) Modification of any director or officer.

(7) adjustment of the scope of business.

(8) Combination or split.

(9) Other changes as prescribed by the NAFR.

Article 12 The administrative licensing procedures for the formation, modification, termination, adjustment of business scope, addition of business types, and approval of the qualifications of directors and officers of consumer finance companies shall be governed by the relevant provisions issued by the NFRA.

Article 13 Foreign exchange administration issues concerned in the formation, modification and business operation of consumer finance companies shall be governed by the relevant state provisions on foreign exchange administration.

Chapter III Business Scope and Operating Rules

Article 14 A consumer finance company may conduct business nationwide.

Article 15 A consumer finance company may conduct all or part of the following RMB business:

(1) Granting consumer loans.

(2) Accepting deposits from its shareholders, its domestic subsidiaries, the parent of the group of which any of its shareholders is a member, and the parent's domestic subsidiaries.

(3) Borrowing from a domestic financial institution.

(4) Borrowing from an overseas financial institution that is a shareholder of the company.

(5) Issuing non-capital bonds.

(6) Engaging in inter-consumer finance company lending.

(7) Providing consultancy and agency services relating to consumer finance.

(8) Other business approved by the NFRA.

Article 16 An eligible consumer finance company in good operating condition may apply to the NFRA or its local office for all or part of the following RMB business:

(1) Asset securitization business.

(2) Fixed-income securities investment business.

(3) Other business approved by the NAFR.

The specific conditions and procedures for a consumer finance company to apply for the business listed in the preceding paragraph shall be governed by the provisions related to administrative licensing.

Article 17 An eligible consumer finance company may apply for the issuance of capital instruments and shall meet the relevant conformity standards required by regulatory requirements.

Article 18 When granting a consumer loan to a borrower, a consumer finance company shall prudentially assess the borrower's payment ability. The line of credit for a borrower shall not exceed 200,000 yuan.

Article 19 A consumer finance company shall establish a fraud risk prevention and control system, and improve anti-fraud models and related technical means to effectively identify fraudulent behaviors, ensure that borrowers' identity data and borrowing intentions are authentic and valid, and guarantee the security of credit funds.

Article 20 A consumer finance company shall follow the principle of interest rate liberalization, establish a risk-based pricing mechanism for consumer loan interest rates, comply with the principles of compliance with laws and regulations, prudential operation, equality, voluntariness, and good faith, and reasonably determine consumer loan interest rates.

Article 21 A consumer finance company that engages in Internet loan business shall comply with laws, regulations, and regulatory provisions related to Internet loans.

Chapter IV Corporate Governance

Article 22 A consumer finance company shall, in accordance with relevant laws, regulations, and regulatory provisions, establish and enhance its corporate governance structure, define the boundaries of primary responsibilities and the requirements for the performance of duties, and establish a corporate governance mechanism characterized by scientific decision-making, strong execution, and effective supervision according to the principles of each entity attending to its own duties, coordinated operation, and effective checks and balances.

Article 23 A state-owned consumer finance company shall incorporate Party building requirements into its bylaws, ensure the statutory status of Party organizations within the corporate governance structure, adhere to and enhance the interlocking leadership system, and integrate the Party's leadership into all aspects of corporate governance.

A private consumer finance company shall establish the Party's organizational structure in accordance with provisions on Party organization establishment, strengthen political leadership, build an advanced corporate culture, and foster sustainable and sound development.

Article 24 A consumer finance company shall establish and improve systems related to shareholder ......