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United States securities and exchange commission logo
September 13, 2023
Na Mei
Chief Financial Officer
Yiren Digital Ltd.
28/F China Merchants Bureau Building, 118 Jianguo Road
Chaoyang District, Beijing 100022
The People's Republic of China
Re: Yiren Digital Ltd.
Form 20-F for the
Fiscal Year Ended December 31, 2022
Filed April 28,
2023
File No. 001-37657
Dear Na Mei:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 20-F filed April 28, 2023
Our Holding Company Structure and Contractual Arrangements with the
Consolidated Variable
Interest Entities, page 3
1. In future filings,
clearly disclose how you will refer to the holding company, subsidiaries,
and VIEs when providing
the disclosure throughout the document so that it is clear to
investors which entity
the disclosure is referencing and which subsidiaries or entities are
conducting the business
operations. Refrain from using terms such as we or our when
describing activities
or functions of a VIE. For example, disclose, if true, that your
subsidiaries and/or the
VIE conduct operations in China, that the VIE is consolidated for
accounting purposes but
is not an entity in which you own equity, and that the holding
company does not
conduct operations. Please include your proposed disclosure in your
response letter.
Na Mei
FirstName LastNameNa Mei
Yiren Digital Ltd.
Comapany 13,
September NameYiren
2023 Digital Ltd.
September
Page 2 13, 2023 Page 2
FirstName LastName
Risk Factors
Our business is subject to complex and evolving Chinese and international laws,
page 35
2. In light of recent events indicating greater oversight by the
Cyberspace Administration of
China (CAC) over data security, particularly for companies seeking to
list on a foreign
exchange, in future filings, please revise your disclosure to explain
how this oversight
impacts your business and your offering and to what extent you believe
that you are
compliant with the regulations or policies that have been issued by
the CAC to date.
Please provide us your proposed draft disclosure in your response
letter.
Holistic Wealth Business, page 75
3. We note your disclosure on page 76 that you launched a digitized
brokerage platform,
China Glory, in December 2020 and discontinued the business in
February 2022. Please
tell us, and revise future filings to disclose, whether you generated
any material revenue or
incurred any material expense from this business, and if so, where
this activity is included
in your financial statements.
Credit-tech Business , page 76
4. Please provide us with, and revise future filings to include, an
enhanced description of the
business that generates financing services revenue, the types of
revenue streams (e.g.,
fees, interest income, etc.) included in financing services revenue,
and how the financing
services business differs from your loan facilitation services
business, which generates
loan facilitation and post-origination services revenue.
Funding Sources, page 80
5. We note your disclosure that funding sources for loans facilitated
include banks, trusts,
microloan companies and consumer finance companies. Please tell us,
and revise future
filings to disclose, the amount or percentage of funding provided by
each of these sources,
for each period presented, accompanied by a discussion of any material
changes, or
trends, in funding sources.
Organizational Structure, page 110
6. In future filings, disclose clearly that the company uses a structure
that involves a VIE
based in China and what that entails, and provide early in the summary
a diagram of the
company s corporate structure, identifying the person or entity that
owns the equity in
each depicted entity. Describe all contracts and arrangements through
which you claim to
have economic rights and exercise control that results in
consolidation of the VIE s
operations and financial results into your financial statements.
Identify clearly the entity in
which investors are purchasing their interest and the entity(ies) in
which the company s
operations are conducted. Describe the relevant contractual agreements
between the
entities and how this type of corporate structure may affect investors
and the value of their
Na Mei
FirstName LastNameNa Mei
Yiren Digital Ltd.
Comapany 13,
September NameYiren
2023 Digital Ltd.
September
Page 3 13, 2023 Page 3
FirstName LastName
investment, including how and why the contractual arrangements may be
less effective
than direct ownership and that the company may incur substantial costs
to enforce the
terms of the arrangements. Disclose the uncertainties regarding the
status of the rights of
the Cayman Islands holding company with respect to its contractual
arrangements with the
VIE, its founders and owners, and the challenges the company may face
enforcing these
contractual agreements due to legal uncertainties and jurisdictional
limits. Please include
your proposed disclosure in your response letter.
Item 5. Operating and Financial Review and Prospects, page 115
7. Please revise future filings disclosures in this section and
throughout the filing to better
describe the fundamental differences between loan facilitation
services whereby you
facilitate loans between borrowers and institutional investors
compared to loan origination
services whereby you make loans to borrowers directly with your own
capital. Please
discuss the facts and circumstances under which you would facilitate
loans between
borrowers and investors versus originate loans with your own capital,
whether the loans
are on or off-balance sheet, and the revenue streams associated with
loans facilitated
between borrowers and institutional investors versus loans originated
or funded with the
Company s own capital.
Loan Performance Data, page 120
8. Please tell us whether the loan performance data relates to loans
facilitated between
borrowers and institutional investors only (i.e., off-balance sheet
loans) or if it includes
loans made directly to borrowers using your own capital (i.e.,
on-balance sheet loans). In
future filings, please provide disaggregated loan performance data and
commentary for
loans facilitated between borrowers and institutional investors and
loans made directly to
borrowers with your own capital for all periods presented. For loans
made directly to
borrowers with your own capital, please revise to include, but don t
necessarily limit your
disclosure to, loans past due, non-performing loans, classified loans,
charge-offs,
recoveries, provision for loan loss, and allowance for credit losses,
and provide a
discussion of any information relevant to understanding the
trends/changes in these items,
and how the changes in credit quality impacted your allowance for
credit losses. Please
provide a draft of your proposed disclosure in your response. Refer to
SAB Topic 11.K.
Financing service fees, page 122
9. Please provide us with, and revise future filings to include, a
breakdown of the different
revenue components included in financing service fees accompanied by a
more robust
discussion explaining any material fluctuations or trends in each of
the components.
10. We note your disclosure on pages 76, 116 and 122 that you charge
borrowers and
institution partners when you use your own capital to make loans
through licensed
subsidiaries, including leasing and microloan companies. Please tell
us, and revise future
filings to better describe:
Na Mei
FirstName LastNameNa Mei
Yiren Digital Ltd.
Comapany 13,
September NameYiren
2023 Digital Ltd.
September
Page 4 13, 2023 Page 4
FirstName LastName
the types of fees charged to the borrowers and how these
amounts are recognized as
revenue;
the types of fees charged to institution partners and how these
amounts are
recognized as revenue;
what role institution partners have in making loans using your
own capital; and
why these institution partners are charged a fee when you use
your own capital to
make the loans.
Insurance brokerage commissions, page 122
11. We note your disclosure on page 122 that you earn insurance brokerage
commissions
determined as a percentage of premiums paid by the policy holder.
Please tell us, and
revise future filings to disclose, the following:
Whether commissions are received on first year premiums and
renewal premiums and
if so, how those commissions are calculated;
Range of commission rates as a percentage of first year premium
and renewal
premium by product type; and,
To the extent you receive renewal commissions, disclose over what
period you are
entitled to receive those commissions.
Consumer Credit Segment, page 128
12. Please provide us with, and revise future filings to include, a
breakdown of other revenue
(e.g., referral service fees, fund distribution fees, penalty fees for
loan prepayment or late
payment, one-time fees for transferring loans over your secondary loan
market and other
service fees) accompanied by a more robust discussion explaining
material fluctuations or
trends in each of these components.
Consolidated Balance Sheets, page F-6
13. In future filings, please revise your combined consolidated balance
sheets to delineate
between current and noncurrent assets, as well as current and
noncurrent liabilities or tell
us why this presentation is not applicable. Refer to Rule 5-02 of
Regulation S-X and ASC
210-10 for guidance.
Disposal Transactions, page F-12
14. We note the disclosure on page 1 that CreditEase is your parent and
controlling
shareholder. We also note your disclosure on page F-40 that Hengcheng
Technology
Development (Beijing) Co., Ltd. ( Hengcheng ) was one of your
consolidated variable
interest entities. Please tell us how you determined that the transfer
of Hengcheng
Technology Development (Beijing) Co., Ltd. to CreditEase was not a
transaction with an
entity under common control resulting in the difference between the
proceeds received
and the book value of the disposal group being recognized as a capital
transaction with no
gain or loss recorded.
Na Mei
FirstName LastNameNa Mei
Yiren Digital Ltd.
Comapany 13,
September NameYiren
2023 Digital Ltd.
September
Page 5 13, 2023 Page 5
FirstName LastName
Revenue from loan facilitation and post-origination services, page F-20
15. We note your disclosure on page 122 that you charge borrowers for
transaction fees for
the work performed through your platform in connecting borrowers with
investors for
facilitating loan transactions, which are recognized as loan
facilitation service and post-
origination service revenue. You also disclose that after disposing of
the online consumer
lending platform targeting individual investors, you now charge
institutional funding
partners for technology-enabled borrower acquisition and facilitation
services provided to
them, which are recognized as revenues of loan facilitation service
and post-origination
services. Please tell us, and revise future filings to clarify, who
pays these transaction fees
accompanied by an enhanced discussion of your revenue recognition
policy adequately
addressing all streams of payment whether from the borrower,
institutional funding
partner, or both.
Other revenue of consumer credit business, page F-22
16. Please tell us, and revise future filings to disclose, how you
recognize revenue for penalty
fees for loan prepayment and late payment, and fees paid for early
repayment.
Revenue from electronic commerce services, page F-23
17. For each period presented, please tell us, and revise future filings
to disclose, the amount
of revenue recorded on a gross amount of product sales when the Group
is a principal and
the amount of revenue recorded on the net amount earned as commissions
when the
Group is an agent. In addition, please tell us, and revise future
filings to disclose, your
accounting policy for the assets (i.e., inventory) when the Group is
considered a principal
that controls the goods or services before they are transferred to the
customers and to
disclose where these assets are categorized on your balance sheet
prior to sale.
Revenue from insurance brokerage services, page F-23
18. We note your disclosure on page F-23 that insurance companies pay you
a commission
annually based on the underlying cash flows of the insurance policy.
To the extent you are
entitled to renewal commissions please tell us, and revise future
filings to include, the
following:
A discussion of the products that generate renewal income;
A discussion of how long you are entitled to receive renewal
commissions by product
type;
Quantification of the amount of renewal income recognized, by
product type, during
the periods presented; and
An explanation of how you are compensated for renewals and your
accounting policy
related to their recognition addressing the steps in ASC
606-10-05-4.
Financing Receivables, page F-27
19. Please provide us with, and revise future filings to include, all of
the applicable disclosure
Na Mei
FirstName LastNameNa Mei
Yiren Digital Ltd.
Comapany 13,
September NameYiren
2023 Digital Ltd.
September
Page 6 13, 2023 Page 6
FirstName LastName
required by ASC 326-20-50 for loans that you originate (i.e., loan
origination services
whereby you make loans to borrowers directly with your own capital),
including but not
limited to the following:
Disclosure that enables the user of the financial statements to
understand the credit
risk inherent in your loan portfolio and how management monitors
the credit quality
of the portfolio;
The amount of accrued interest receivable and where it is
presented;
Your policy for measuring an allowance for credit losses for
accrued interest
receivables;
Your policy for writing-off accrued interest receivable;
Quantitative and qualitative information by class of financing
receivable and major
security type about the credit quality of financial assets
including:
o A description of the credit quality indicator(s),
o The amortized cost basis, by credit quality indicator, and
o For each credit quality indicator, the date or range of
dates in which the
information was last updated for that credit quality
indicator.
When disclosing credit quality indicators of financing receivables
and net investment
in leases, present the amortized cost basis within each credit
quality indicator by year
of origination (that is, vintage year);
A description of how expected loss estimates are developed;
A description of the entity's accounting policies and methodology
to estimate the
allowance for credit losses, as well as a discussion of the
factors that influenced your
current estimate of expected credit losses, including past
events, current conditions,
and reasonable and supportable forecasts about the future;
A discussion of risk characteristics relevant to each portfolio
segment;
A discussion of the changes in the factors that influenced
management's current
estimate of expected credit losses and the reasons for those
changes (for example,
changes in portfolio composition, underwriting practices, and
significant events or
conditions that affect the current estimate but were not
contemplated or relevant
during a previous period);
A discussion of the reversion method applied for periods beyond
the reasonable and
supportable forecast period;
Nonaccrual policies, including the policies for discontinuing
accrual of interest,
recording payments received on nonaccrual assets (including the
cost recovery
method, cash basis method, or some combination of those methods),
and resuming
accrual of interest, if applicable;
The policy for determining past-due or delinquency status;
The policy for recognizing write-offs within the allowance for
credit losses.
20. Please tell us, and revise future filings to disclose, if any of your
financing receivables are
restricted solely to satisfy a specific obligation and a description
of the nature of
restrictions placed on those assets. Please refer to ASC
860-30-50-1A(b)(2).
9. Secured Borrowings, page F-42
Na Mei
Yiren Digital Ltd.
September 13, 2023
Page 7
21. We note your disclosure on page F-42 that Yichuang Financial Leasing
transferred its
creditor s right of certain financial receivables totaling RMB 550.0
million to external
creditors in 2021. We also note from your accounting policy disclosure
on page F-32 that
the related financing receivables remain on the Company s
consolidated balance sheets.
Please tell us, and revise future filings to disclose, the following:
A description of the terms and collateral pertaining to any
secured borrowings that
are not related to the transfer of creditor s rights in 2021
described on page F-42 and
the associated secured borrowing balance at December 31, 2022;
The interest rates and interest expense related to secured
borrowings; and,
Whether the external creditors have the right to sell or repledge
the financing
receivables. If so, please revise future filings to disclose this
fact and to report these
financing receivables separately from other assets not so
encumbered. Please refer to
ASC 860-30-45-1.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact William Schroeder at 202-551-3294 or Ben Phippen at
202-551-3697 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Madeleine Joy Mateo at 202-551-3465 or Susan Block at 202-551-3210 with
any other
questions.
FirstName LastNameNa Mei Sincerely,
Comapany NameYiren Digital Ltd.
Division of
Corporation Finance
September 13, 2023 Page 7 Office of
Finance
FirstName LastName