COVID-19 Loan Recipients Also Issued Credit Cards... Pros and Cons of 'Bundling Sales' in the Banking Sector

Kim Han-jung "One in three COVID-19 loans bundled... Bank sector's performance building becomes reality"

[Asia Economy Reporter Park Sun-mi] One in three small business owners who received COVID-19 loans fell victim to banks' financial product "bundling" (variant coercion).

According to the 'Self-inspection Results of Commercial Banks Regarding COVID-19 Loans' submitted by the Financial Supervisory Service to Kim Han-jung, a member of the Democratic Party of Korea, on the 6th, banks bundled financial products such as credit cards as a condition when executing small business loans for COVID-19 loans about once every three times.

Among the 677,000 COVID-19 first and second round loans executed from April to June this year, loans that included other financial products reached 228,000, accounting for 34% of the total loans. Variant coercion was most common with 170,000 credit card issuances, followed by 69,000 cases of savings and deposit subscriptions, and 6,218 cases of insurance and investment products that could result in principal loss upon early termination.

The bank with the highest number of variant coercion cases was Industrial Bank of Korea. Industrial Bank of Korea accounted for 96,000 cases, representing 42.1% of all variant coercion cases. Hana Bank had 36,000 cases (15.6%), Woori Bank 29,000 cases (13%), NongHyup Bank 15,000 cases (6.5%), and Shinhan Bank 13,000 cases (6.1%).

In particular, Jeonbuk Bank, Woori Bank, and Hana Bank were confirmed to have bundled other financial products in more than half of the COVID-19 loans they executed. The ratio of variant coercion cases to COVID-19 loan executions by bank was highest at Jeonbuk Bank with 60%, followed by Woori Bank at 59%, Hana Bank at 50%, Daegu Bank at 45%, Jeju Bank at 40%, and Industrial Bank of Korea and Gyeongnam Bank at 36%.

The banks maintain that there was no violation of the law. Under current law, coercion is only recognized if a financial product exceeding 1% of the loan amount is subscribed to within one month of receiving the loan, and credit cards are not subject to this regulation at all.

Regarding this, Representative Kim said, "It has been confirmed that commercial banks are selling products using government public funds as bait," and emphasized, "It is a serious problem that they cleverly exploited the concerns of small business owners who feared loan rejection by evading current coercion regulations and used this to boost their own performance." He added, "Strict measures are needed to prevent bundling issues such as variant coercion in loans involving government funds."

This content was produced with the assistance of AI translation services.