Several borrowers in mainland China have recently lodged complaints about being required to pay insurance fees amounting to 27% of their loan amount when applying for personal loans from Hengfeng Bank. The bank has denied any responsibility for these borrowers’ concerns.
According to a report by Shandong’s new media outlet “New Yellow River,” data from multiple complaint platforms in the past three years have shown that the most common complaint against Hengfeng Bank as a funding party in credit disputes is the mandatory bundling of “guaranteed insurance with loans.”
In one public complaint, a borrower obtained a loan of 500,000 RMB through a third party in November 2021, with Hengfeng Bank as the funding source. The borrower stated that the prerequisite for obtaining the loan was to “purchase insurance in order to receive the loan.” Upon early settlement in the 32nd installment, the borrower discovered that the insurance fee alone exceeded 136,000 RMB, reaching 27.2% of the loan amount.
In another complaint, a borrower received a loan of 170,000 RMB through a third party in June 2023, with funding from Hengfeng Bank. The borrower later found out that the monthly repayment of 6,621 RMB included an additional 1,496 RMB for insurance. By the 30th installment, the borrower had already been charged 44,800 RMB in insurance fees.
It has been reported that in specific business dealings at Hengfeng Bank branches, such bundled sales tactics and high hidden costs are not uncommon.
For instance, in the car mortgage business at the Zhengzhou branch of Hengfeng Bank, a borrower reported that when applying for a 46,000 RMB loan in March 2023 through “Sunshine Instant Loan Insurance,” they were forced to purchase personal loan guarantee insurance. The borrower claimed that they were not informed throughout the process that an additional 404.8 RMB would be deducted monthly for insurance until the loan settlement, where a total of 9,884.05 RMB was charged as insurance fees. Calculated with the real annualized internal rate of return, the total comprehensive annual interest rate for this loan combined with the insurance fees reached 18.96%.
Similar controversy arose in the credit loan business at the Chongqing branch of Hengfeng Bank as a funding party. A borrower mentioned that when applying for a 14,000 RMB loan in January 2024 through the “Ease Flower” app, the borrower was required to purchase related insurance guarantees to receive the loan. Despite the stated nominal interest rate of 5.5%, an additional 1,414.38 RMB was deducted as total insurance fees. The borrower questioned whether this structured charging model was a way to circumvent regulations.
Many borrowers highlighted in their complaints that during the loan application process, only the lower loan interest rates were displayed on the front-end interface, without clear disclosure of the high insurance costs, essentially depriving consumers of their autonomy to choose.
When borrowers demanded refunds, the bank’s customer service response often was: “Insurance premiums are not collected by the bank, as the bank merely acts as the collection agent. Refunds need to be negotiated directly with the insurance company.”
Following the exposure of these reports, the issues quickly trended on Weibo. A commentary article on NetEase stated that the bank is far from innocent in this loan chain.
The article argued that the bank, as a provider of funds and the ultimate responsible party in the entire lending process, has an undeniable duty to conduct thorough assessment and control. Furthermore, the bank executes the “collection on behalf” action, deducting each insurance premium from the borrower’s account through Hengfeng Bank’s system.
More importantly, the article emphasized that the bank is one of the biggest beneficiaries of this business model. By introducing insurance to enhance credit, the bank transforms high-risk customers into low-risk ones, thus reducing its default risk and expanding its loan portfolio.
Public information reveals that Hengfeng Bank is a national joint-stock commercial bank headquartered in Jinan, the capital of Shandong Province, with the actual controlling entity being the State-owned Assets Supervision and Administration Commission of the Shandong Provincial Government of the CCP.