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Non-banking lenders charge high interest rates regardless of credit record

All News 15:11 April 04, 2016

SEOUL, April 4 (Yonhap) -- South Korea's non-banking lenders are accused of charging unusually high interest rates regardless of borrowers' credit ratings, a credit card association said Monday.

Non-banking lenders such as savings banks, card issuers and capital companies are usually supposed to charge high rates on loans extended to customers who carry poor credit ratings, while preferential interest rates are applied to those with good credit records.

In reality, however, the interest rates for local borrowers remain exceptionally high regardless of their credit standing.

As of Feb. 29, the loans rolled out by the country's six card companies -- KB Kookmin Card, Lotte Card, Samsung Card, Shinhan Card, Hana Card and Hyundai Card -- requested an average interest rate of more than 10 percent annually for customers with first, second and third-grade credit ratings, according to data from the Credit Finance Association (CREFIA).

The rate is far higher than the rates of three to six percent charged by commercial banks on loans to those with similar credit ratings, CREFIA said.

Savings banks and capital companies were charging higher rates of up to 28.58 percent for loans to the holders of the top three credit ratings at the end of February, it said.

Analysts called on the financial authorities to keep a watchful eye on the secondary lenders to see if they apply reasonable rates depending on customers' credit records.


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