China’s latest move against predatory lenders is crippling legitimate loan facilitators like Yiren and Qfin by imposing a strict interest rate cap
image credit: Bamboo Works
Key Takeaways:
- Yiren Digital plunged into the red in the fourth quarter of 2025, while Qfin’s profit tumbled, as regulators enforced a 24% ceiling on borrowing costs levied by private lenders
- All lending platforms must fully disclose every facilitation fee by Aug. 1 — stripping away gray zone fees that once boosted their profits
Beijing has once again reminded investors of the type of sudden new regulation it often doles out without warning, which can quickly change the fortunes of financial companies for the worse.
Last Tuesday, China’s Ministry of Public Security and the National Financial Regulatory Administration (NFRA) signaled the start of a new phase in their war on the financial “black and gray” markets. The official rhetoric targets “predatory” brokers and other underworld financial firms that do things like tricking grandmothers into guaranteeing loans for strangers. But legitimate consumer loan platforms like Yiren Digital Ltd. (NYSE:YRD) and Qfin Holdings Inc. (NASDAQ:QFIN) (3660.HK) are also ending up as collateral damage in the latest dragnet.
At the heart of the matter is a 24% cap on interest rates. While China’s Supreme People’s Court has long held that rates above that level are legally unprotected, the limit was previously just a judicial guideline. But that changed last October, when it became a hard ceiling, above which anything was illegal. Now, under a new enforcement regime declared last week, authorities are shifting from administrative fines to aggressive criminal prosecutions, targeting lenders who exceed the cap as criminals rather than simply regulatory violators.
For years, platforms like Qifu and Yiren Digital operated in a lucrative “gray” zone by charging interest rates that often effectively drifted toward 36% when various fees were included. They could get away with this because borrowers technically volunteered to pay those charges under their contracts. But after the October rule change, regulators have stripped away these extra interest costs disguised as …
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