Consumer finance companies serving more than 300 million people ("consumer finance companies") will welcome the new rules.
On the evening of December 18, the State Administration of Financial Supervision and Administration issued the Measures for the Administration of Consumer Financial Companies (Consultation Paper) (hereinafter referred to as the "Consultation Paper"), which involves optimizing access policies, highlighting hierarchical business supervision, strengthening corporate governance, strengthening risk management, and focusing on the protection of consumer rights and interests. The deadline for feedback is January 19, 2024. In the Consultation Paper, the most concerned is the significant increase in the access criteria - the shareholding requirement of major investors has been increased from no less than 30% to no less than 50%;The minimum registered capital of the company has also been significantly increased from 300 million yuan to 1 billion yuan. At the same time, the Consultation Paper adds some regulatory indicators. For example, it is stipulated that the balance of the guarantee credit enhancement business of the consumer finance company shall not exceed 50% of the total loan balance of the company;Consumer finance companies are required to have a leverage ratio of at least 4%. In addition, the Consultation Paper also adds two new chapters, "Protection of Consumer Rights and Interests" and "Management of Cooperative Institutions", to give more prominence to strengthening the protection of consumer rights and interests. In fact, since the former China Banking Regulatory Commission (CBRC) issued the Measures for the Administration of the Pilot Program for Consumer Financial Companies (the "Measures") in July 2009, the Measures have undergone a revision in November 2013. After a lapse of 10 years, the Consultation Paper has been further refined in many aspects. "After years of development, the business model and risk characteristics of the consumer finance company industry have undergone significant changes, and the current measures can no longer meet the high-quality development and regulatory needs of consumer finance companies. At the same time, in recent years, the State Administration of Financial Supervision has issued a series of regulatory systems and regulations in terms of corporate governance, equity management, and consumer rights protection. The person in charge of the relevant department of the State Administration of Financial Supervision said. Dong Ximiao, chief researcher of Zhaolian, pointed out that if the "Measures for the Management of Consumer Financial Companies" is formally promulgated, it will make the system more in line with the times and more suitable for the development and change of the situation, and then promote consumer financial companies to play a positive role in being close to the market, flexible and efficient, adhere to the principle of "universal should be moderate, and the benefits are endless", do a good job in inclusive finance and digital finance, and contribute to boosting consumption and expanding domestic demand.
The entry standard has risen sharply: 300 million to 1 billion, 30% to 50%.
For consumer finance companies, the "gold content" of the license has endured for a long time. In the Consultation Paper, the changes in the access criteria have attracted much attention, among which the registered capital of consumer finance companies has been significantly increased from the current minimum requirement of 300 million yuan to 1 billion yuan. This means that some consumer finance companies may face a request for capital increase. Wind data shows that among the 31 licensed consumer finance companies in the country, there are 10 companies with a registered capital of less than 1 billion yuan. It is also observed that since the beginning of this year, three consumer finance companies have launched capital increase projects. For the shareholders behind the scenes, the Consultation Paper also raises the standards for the assets and operating income of major investors, as well as the minimum shareholding ratio requirements. Specifically, if a financial institution is the main investor of a consumer finance company, the total assets required by it at the end of the most recent fiscal year will be increased from no less than 60 billion yuan to no less than 500 billion yuanIf a non-financial enterprise is the main investor of a consumer finance company, its operating income in the most recent fiscal year will increase from no less than 30 billion yuan to no less than 60 billion yuan. At the same time, the shareholding requirement of major investors in consumer finance companies has been increased from no less than 30% to no less than 50%. "This is in line with the spirit of the first financial work conference's 'strict access standards and regulatory requirements for small and medium-sized financial institutions', which will help ensure the quality of shareholders of consumer finance companies from the source, consolidate the responsibilities of major shareholders, and also help maintain a moderate competition pattern in the market. Dong Ximiao pointed out. The person in charge of the relevant department of the State Administration of Financial Supervision said that first, from the perspective of regulatory practice in recent years, increasing the shareholding ratio of major investors is conducive to consolidating shareholder responsibilities, enhancing shareholders' willingness to participate in the company's operation, giving better play to the advantages of shareholder resources, and promoting shareholders to actively play a supporting role. Second, it is conducive to improving the efficiency of decision-making and avoiding the problem of corporate governance failure and imbalance due to the relative dispersion of equity. According to wind statistics, among the 31 licensed consumer finance companies in the country, 15 institutions currently have the largest shareholder holding less than 50% of the shares. "There is still some time before the deadline, and it is not excluded that some provisions will be subject to revision. However, on the whole, the increase in the entry threshold is the general trend. In the future, the shareholding ratio and qualifications of the major shareholders of the consumer finance company will change. Huang Dazhi, a senior researcher at the Xingtu Financial Research Institute, pointed out.
New regulatory indicator: leverage ratio shall not be less than 4%.
Since the establishment of the first batch of consumer finance companies in 2010, the industry has experienced more than ten years of development. Up to now, there are 31 licensed consumer finance companies operating in the country. "The exploration of innovation and change by consumer finance companies over the years has provided a lot of experience and lessons for the field of consumer finance. At present, large and medium-sized commercial banks have significantly improved their willingness and ability to develop consumer finance, and have obvious advantages such as integrated operation and large-scale customer base. At the same time, the leverage ratio of China's residential sector has been relatively high, and the customer base has basically sunk to the bottom. Dong Ximiao said. According to the "China Consumer Finance Company Development Report (2023)" released by the China Banking Association, by the end of 2022, the number of customers served by consumer finance companies exceeded 300 million, reaching 33.8 billion person-times, a year-on-year increase of 184%；The asset scale and loan balance both exceeded 800 billion yuan, reaching 884.4 billion yuan and 834.9 billion yuan respectively, a year-on-year increase of 175%。However, while the industry has been developing rapidly, there are also risks. "Based on the needs of risk prevention and control, consumer finance companies cooperate with financing guarantee companies, insurance companies and other institutions as a means of risk mitigation for loans. However, some consumer finance companies have long relied too much on the development of this model, relaxed the substantive review of the borrower's credit qualification level, lacked independent risk control capabilities, and also faced the risk that the guarantee company would not be able to compensate. In addition to the loan interest, the borrower also needs to pay a guarantee fee, which indirectly pushes up the comprehensive interest rate of the loan. The person in charge of the relevant department of the State Administration of Financial Supervision pointed out. In this regard, the Consultation Paper stipulates that the balance of the credit enhancement business guaranteed by a consumer finance company shall not exceed 50% of the total loan balance of the company, and a certain period of rectification and transition will be granted in the future. In addition, consumer finance companies are required to have a leverage ratio of no less than 4% to limit blind expansion. It is worth noting that the Consultation Paper also optimizes and adjusts the business scope of consumer finance companies, focusing more on their main responsibilities and main businesses. On the one hand, it distinguishes between basic business and special business. Seven businesses, including "issuing personal consumption loans" and "issuing non-capital bonds", will be included in the basic business, and four businesses, including "asset-based business", "fixed-income investment business" and "consulting services related to consumer finance", will be included in the special business. On the other hand, non-main and non-essential businesses will be abolished. In view of the high professionalism of insurance sales and the large number of related complaints and disputes involved, consumer finance companies basically did not carry out such business, so the business of "selling insurance products related to consumer loans" was cancelled.
Strengthen the protection of consumer rights and interests: Consolidate the main responsibilities of consumer finance companies.
Different from traditional banks, which are positioned at customers with stable incomes and good credit status, consumer finance companies target a relatively low customer base, mainly long-tail groups that cannot be covered by traditional banks. In this regard, the Consultation Paper adds two special chapters on "Protection of Consumer Rights and Interests" and "Management of Cooperative Institutions" to further highlight and strengthen the protection of consumer rights and interests. Specifically, on the one hand, the main responsibility of consumer protection of consumer finance companies should be consolidated. It is required to incorporate the protection of consumer rights and interests into corporate governance, establish and improve the consumer protection work mechanism, establish a consumer rights protection committee, improve the consumer protection information disclosure mechanism and personal information protection system, and strengthen the management of consumer suitability. According to the Consultation Paper, consumer finance companies should establish a consumer suitability management mechanism, carry out pre-loan reviews in accordance with regulations, use information technology and other means to improve the accuracy of customer portraits, and prudently assess consumers' income levels and debt repayment ability. On the other hand, strengthen the restraint and management of cooperative institutions. Consumer finance companies are required to strengthen the management of access and concentration of cooperative institutions, conduct continuous management and evaluation of cooperative institutions, clarify the prohibitive provisions of cooperative institutions, and avoid infringement of the legitimate rights and interests of consumers due to non-standard collection by cooperative institutions, especially collection agencies;Consumer finance companies are required to implement the main responsibility for collection management, formulate performance appraisal and reward and punishment mechanisms for collection agencies, and carry out entrusted collection activities in accordance with laws and regulations, so as to effectively protect the legitimate rights and interests of financial consumers. "In view of the sinking customer base of consumer finance companies and the general financial literacy of consumers, it is more prominent to strengthen the protection of consumer rights and interests, and it is required to establish and improve the working mechanism of consumer protection, strengthen the management of cooperative institutions, strengthen the management of consumer suitability, and implement the main responsibility of collection management. Dong Ximiao said that in the next step, consumer finance companies should make more use of financial technology to improve the standardization and intelligence of collection. For future development, Dong Ximiao further pointed out that it is recommended to appropriately relax the restrictions on the loan amount and purpose of consumer finance companies, support dislocation services, orderly competition, and fill the gaps in the market and customer financial needs, "For loans of no more than 200,000 yuan, only negative list use constraints are made to support consumer finance companies to better serve individual industrial and commercial households, second-hand car consumers and other customer groups." ”
Caijing reporter Zhang Yingxin also contributed to this article).
*: Financial Magazine.