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When a plan was announced to cut the legal maximum interest rate, complaints arose from the credit industry and the second financial sector that it was a “realistic plan to revitalize private finances.” It is pointed out that large numbers of people with little credit who cannot borrow money could be expelled into the private financial market.
As reported by the Financial Services Commission on the 16th, at the end of last year, loans for loans reached 15,900 trillion won and the number of users reached 1,777,000. A credit industry official said: “Now, you have to consider that new loans for low credit people are difficult.”
The damage to the savings banking industry is also expected to be overwhelming. Savings banks should also charge the highest interest rate to existing borrowers. It is analyzed that even if the Execution Decree of the Loan Business Law is applied from the end of next year, it is necessary to collect loans from borrowers who receive an annual interest rate of 20% or more. Of the 37 savings banks that manage credit loans, 21 have interest rates above 20%. There are also eight places that handle interest rates above 20% and exceed 20% of all loans, most of which are the major savings banks.
In accordance with the standard terms and conditions for credit operations, savings banks must reduce the contracted interest rate to the legal maximum when renewing or extending a loan if the contracted interest rate exceeds the legal maximum rate. A senior savings bank official said, “For low-credit borrowers with a high delinquency rate, savings banks also have an incentive to get their loans back.” 2 In the financial sector, it is said that loans should be concentrated in high creditors. It is noted that it will be possible to grant loans to low and mid-range creditors without knowing when the legal maximum interest rate will drop again.
A savings bank official predicted that “the number of savings banks will increase again, focusing on home loans that are difficult for low creditors to use, recovering the amount that was previously used for credit loans.” The card industry is showing signs of loan reduction, focusing on cash services with high interest rates. In September, the cash service balance of seven credit card companies (Shinhan, Samsung, Kookmin, Hyundai, Lotte, Woori, and Hana) was 3,886.4 billion won, down 10.2% from the same period. last year (43,302 billion won). The proportion of members who use the cash service at an interest rate of 20% or more from the credit card company is Samsung Card (53%) KB Kookmin Card (49%) Hana Card (48%) Hyundai Card (48%) Shinhan Card (41%) Lotte Card (39%), etc. Industry officials were concerned that “the credit card loan will also start targeting only high creditors because we don’t know when the interest rate will be cut again.”
The Financial Services Commission predicted 316,000 people, or 13%, of users of interest rates of 20% or more would be kicked out, but the industry expects at least 20% of borrowers to be turned away. Annual interest income from the savings banking industry is also expected to decline by more than 20%.
Reporter Park Jin-woo [email protected]
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