[2020 National Audit] Half of Card Loan Users Are 'Multiple Debtors' Who Rollover Debt

Jeon Jae-su "Concerns Over Poor Quality Grow, Must Prepare for Delinquency Rate Issues"

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[Asia Economy Reporter Ki Ha-young] More than half of the people who used high-interest card loans (card loans) with an average annual interest rate of 14% borrowed from three or more financial institutions, making them multiple debtors who roll over debt with debt. Concerns have been raised that the delinquency issue must be addressed as the insolvency of multiple debtors could expand into a chain of insolvencies among card companies.

According to data on the "Card Loan Balance and Delinquency Status" received by Jeon Jae-su, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, from the Financial Supervisory Service on the 14th, among the total 2,603,541 card loan users as of the first half of this year, 1,460,027 (56.1%) were multiple debtors using card loans from three or more institutions.

The number of multiple card loan debtors is on the rise. The number of debtors using card loans from three or more companies increased by about 36.3%, from 1,895,074 in 2015 to 2,583,188 in 2019. Considering that 1,460,026 multiple debtors used card loans in just the first half of this year, the number of multiple debtors is expected to exceed last year's total.

The card loan balance in the first half of this year was 29.7892 trillion won. It steadily increased from 21.4042 trillion won in 2015, rising about 39.2% over four and a half years. Among this, the loan balance of borrowers using card loans from one company was 3.6849 trillion won (12.3%), from two companies was 7.1379 trillion won (23.9%), and from three or more companies was 18.9663 trillion won (63.6%).

The card loan recovery rate in the first half was 11.8%. This is even lower than the 26.6% at the end of 2008 during the global financial crisis, raising concerns that the risk of delinquency due to multiple debtors could increase further.

Rep. Jeon Jae-su pointed out, "Despite the high average interest rate of 14%, the number of multiple debtors who endure with card loans for immediate livelihood is increasing," adding, "Although card companies' profits are increasing due to multiple debtors, the significant proportion means the risk of insolvency is also high."

He continued, "Since the insolvency of multiple debtors could expand into a chain of insolvencies among card companies, we must prepare for delinquency issues," and "At the same time, support measures should be strengthened to help people avoid falling into the quagmire of multiple debts."

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