On February 8, the official website of the China Banking and Insurance Regulatory Commission announced the second ticket in 2022, which showed that Zhaolian Consumer Finance Co., Ltd. (hereinafter referred to as “Zhaolian finance”) was fined 2.9 million yuan by the China Banking and Insurance Regulatory Commission for eight violations.
The reporter learned that the eight illegal facts of Zhaolian finance under supervision and investigation include: exaggeration and misleading in marketing publicity; Charging platform service fees is inconsistent with the quality and price; Product pricing management is not prudent; The risk management of cooperative merchants is not in place; Off balance sheet exposure of joint loans is not reported; Improper collection behavior; The audit of consumer protection is not standardized; The management of consumer complaints is not in place.
In response to the regulatory ticket, Zhaolian finance responded to the reporter of Huaxia times that the relevant matters originated from the consumer insurance inspection notice issued by the CBRC in October 2020. The company attaches great importance to the supervision opinions, seriously reflects, immediately investigates and makes changes in the process of on-site inspection, formulates rectification plans and specific measures, continuously strengthens the rectification efforts, and establishes a long-term mechanism for consumer protection. All rectification work has been completed according to the regulatory requirements.
Zhaolian financial responded to the regulatory ticket
According to public information, Zhaolian finance was established in March 2015. It is a licensed consumer finance company approved by the China Banking and Insurance Regulatory Commission and jointly established by China Merchants Bank Co.Ltd(600036) and China United Network Communications Limited(600050) . With a registered capital of 10 billion yuan, it has two major consumer finance product systems of “good term loan” and “credit payment”, and its business covers a wide range of regions across the country.
By the end of June 2021, Zhaolian finance had the largest total assets of 129.843 billion yuan. It is also the only consumer finance company with assets of more than 100 billion yuan so far.
On March 19, 2021, China Merchants Bank Co.Ltd(600036) announced that the board of directors of the bank considered and approved the proposal on the IPO of China Merchants Union and the acquisition of the equity of China Merchants Yonglong, and started the research on the listing of China Merchants Union finance. The specific listing plan will be submitted to the board of directors for deliberation after it is mature. In this way, after home credit consumer finance Co., Ltd. and instant Consumer Finance Co., Ltd., Zhaolian finance has become the third licensed consumer finance company in China to announce its proposed IPO.
As a head licensed consumer finance company, Zhaolian finance has excellent performance. By the first half of 2021, Zhaolian finance had achieved an operating revenue of 7.390 billion yuan, a year-on-year increase of 22.69%; The net profit was 1.542 billion yuan, a year-on-year increase of 166.77%.
Throughout the company’s performance in recent years, the revenue and net profit of Zhaolian finance have also maintained a double growth trend. From 2018 to 2020, Zhaolian finance achieved operating revenue of 4.163 billion yuan, 6.956 billion yuan, 10.74 billion yuan and 12.816 billion yuan respectively; The net profit was 1.189 billion yuan, 1.253 billion yuan, 1.466 billion yuan and 1.668 billion yuan respectively.
As of June 2021, the balance of financial loans of Zhaolian is 133.298 billion yuan, the company has granted credit to 48.5552 million households, issued loans of 1.17 trillion yuan, and the average loan interest rate is about 19.00%. The average loan amount in the first half of 2021 was 4818.93 yuan, an increase from 3478.28 yuan in 2020.
For the punishment, Zhaolian finance told our reporter that the relevant problems pointed out in the regulatory inspection reflect the aspects that need to be standardized and improved in the development process of the company in the initial stage. The company will deeply learn from the punishment lessons, strictly implement the regulatory provisions, improve the construction of system and mechanism, integrate the protection of consumers’ rights and interests into all links of the company’s operation and development, further improve the compliance management level of consumer protection, and provide consumers with safer, convenient and high-quality consumer financial services.
how does Internet consumer finance develop in the norms?
With the emergence of various forms of Internet finance, Internet consumer finance with electronization, networking and informatization is also booming. The data show that the consumer finance industry has entered a new stage of rapid development in recent years. The balance of personal short-term consumer loans has increased from 956.7 billion yuan at the end of 2010 to 8777.4 billion yuan at the end of 2020, an increase of 9 times in 10 years.
In 2021, with the normalization of epidemic prevention and control, the economy gradually recovered, and the consumer finance industry also returned to a stable growth trend. By the end of November 2021, the balance of personal short-term consumer loans had reached 9.38 trillion yuan, a year-on-year increase of 8%.
It is understood that the market participants in the consumer finance industry mainly include banks, consumer finance companies, small loan companies, mutual financing platforms and other types. According to the inclusive finance report released by the central bank, in 2017, the proportion of adults who obtained loans from institutions and platforms other than banks was 22.74%, which increased to 24.16% in 2019.
According to the statistical data of Bank Of China Limited(601988) Industry Association, 25% – 50% of the customers of 15 consumer finance companies in 2019 were high school or below, and more than 50% were from third tier and below cities. The customer group with a monthly income of 3000-5000 yuan is the customer group with the largest proportion of consumer finance companies. Compared with banks, the customer base of consumer finance companies is sinking.
In an interview with our reporter, a banker in Shenzhen said that under the loan approval mode of traditional banks, many individuals with substandard assets are difficult to obtain loans, and institutions involved in consumer finance business can serve customers that most traditional banks cannot cover. In this regard, consumer finance companies have their own “first mover advantage” and also play a certain role in Inclusive Finance.
On the other hand, the person believes that the service objects of consumer finance companies are mainly heavy customers. This kind of customer group belongs to high-risk groups and has a certain degree of risk. At the same time, consumer finance is mainly based on platform data, but the more customers sink, the less credit investigation data will be, and the difficulty of risk control of consumer finance companies will further increase. Moreover, the social punishment for small amount of dishonesty is not enough, and the cost of personal dishonesty is low, which also aggravates the fraud risk faced by consumer finance companies.
The central bank shall issue an explicit announcement on the interest rate of all loans in March 2021. This also means that the interest rate of consumer products will be more transparent and consumers’ right to know will be further guaranteed. In August 2021, the regulatory authorities put forward window guidance to commercial banks, consumer finance companies and other financial institutions, requiring that the individual loan interest rate be fully controlled within 24%. So far, the interest rate of loan products of consumer finance companies has returned to rationality.
Facing this trend, Su Xiaorui, a senior analyst at Analysys, pointed out that the core business of licensed consumer finance is credit, so the compliance work is mainly carried out around the credit business. The compliance of consumer finance companies has become the focus of supervision, and the number of industrial fines may further increase to a large extent in the future.
Then, how can consumer finance companies further explore new markets on the premise of compliant operation? The above-mentioned people believe that with the introduction of relevant regulatory provisions on consumer rights and interests protection, interest rate and information security, the consumer finance industry will face new adjustments in exhibition mode, division of labor, products and customer base, “In the context of regulatory standardization and normalization, consumer finance companies should make efforts to refine customer operations, strengthen external expansion and deepen scene integration, and improve the level of core competencies and management such as science and technology, risk control and operation.”
