China has announced stricter regulations governing the issue and use of credit cards as it seeks to rein in consumer risk.
The rules were jointly published by the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC).
Regulators sought to better manage China’s $1.3 trillion credit card industry, urging lenders to adopt a “prudent” growth strategy, and monitor risks more closely.
“China’s credit card business has been growing rapidly, playing a key role in facilitating payment and consumption,” CBIRC said in a statement on its website accompanying the release of the new rules.
“Recently, however, some banks … are lax in risk management, and have behaved in ways that hurt customers’ interest,” the regulator said.
The CBIRC cited issues such as unclear disclosure of interest and fees, unilaterally promoting low interest rates, charging interest disguised as handling fees, obscuring actual costs and setting unreasonably low instalment payments.
Banks are now barred from using the number of cards issued or market share as main performance metrics, and are required to cap the number of dormant cards at 20% of the total.
Chinese banks have issued a total of 800 million credit cards as of the end of 2021, with outstanding loans totalling 8.62 trillion yuan ($1.29 trillion), according to the PBOC.
The new rules require banks to tighten scrutiny over credit card loans, and strengthen risk management control. Roughly 86 billion yuan of credit card loans, or 1% of total outstanding, are overdue for six months or longer.
Banks must also set up a system to monitor, identify, alert and prevent abuse in the credit card business, according to the rules.
- Reuters, with additional editing by George Russell