[Exclusive] Citibank Korea to Allow Loan Extensions Despite Halting New Sign-ups

Citibank submits consumer protection measures to financial authorities
Follow-up actions after the Financial Services Commission's 'order' on the 27th
Uncertainty over long-term extension like other banks
Full waiver of fees for refinancing and early repayment from the 1st

Korea Citibank headquarters located in Jongno-gu, Seoul. Photo by Jang Jin-hyeong aymsdream@

[Asia Economy Reporter Song Seung-seop] Borrowers who took loans from Citibank Korea, which decided to phase out its retail banking, will be able to extend their loan maturities. Citibank Korea had not disclosed whether loans maturing in the future would be extended when announcing the liquidation of its retail banking, causing anxiety among customers. However, it is uncertain whether extensions will be granted for a long period like other banks, so consumer dissatisfaction and demand for refinancing loans are expected to persist.

According to the financial sector on the 2nd, Citibank Korea is currently discussing consumer protection plans with the Financial Supervisory Service. The reported contents are said to include a plan to extend customers' loans, including unsecured loans, until a certain point even after the suspension of consumer finance services.

A Citibank Korea official said, "We are discussing consumer protection measures with financial authorities," adding, "Even after announcing the suspension of new subscriptions, we plan to allow loan extensions for a certain period to minimize consumer damage." Regarding the announcement timing, the official said, "It will be difficult to announce within this week," and "We will disclose it after consultation with the financial authorities."

Citibank Korea's measures are part of the Financial Services Commission's order issued on the 27th of last month. The FSC decided on the order, citing a high possibility of inconvenience and reduction of rights for financial consumers due to Citibank Korea's phased withdrawal (liquidation) from consumer finance. According to the order, Citibank Korea must submit detailed plans to the head of the Financial Supervisory Service, including basic principles for user protection, user protection measures by product and service, business channel operation plans, plans to prevent personal information leakage, and organization, personnel, and internal control.

Will Financial Consumers’ Anxiety Decrease?... Demand for Refinancing Loans Likely to Continue

The measures also strongly aim to alleviate the dissatisfaction and anxiety of Citibank Korea customers. In fact, posts expressing concerns about whether Citibank Korea will extend loans are appearing on online communities. Recently, a petition including related content was created on the Blue House’s National Petition Board, currently supported by 1,716 people. Inquiries to Citibank Korea’s customer center have surged from an average of about 4,000 per day to 5,000?6,000, indicating a flood of questions. This is because, amid tightened household loan regulations by financial authorities making it difficult to borrow from banks, borrowers could face a sudden crisis if full lump-sum repayment is demanded contrary to their repayment plans.

Even if protection measures are announced, the level of inconvenience felt by consumers will vary depending on the period, scope, and number of extensions. Typically, unsecured loans or credit line loans (overdraft accounts) have a maturity of one year but can be extended up to 10 years if the credit level does not significantly change. Since Citibank Korea is completely withdrawing from consumer finance, borrowers with long-term repayment plans will inevitably face increased uncertainty.

There is a prevailing view that demand for refinancing loans to switch to other banks will also be high. Citibank Korea has been waiving early repayment fees in full since the day before. The principal and interest payment or repayment conditions remain the same as before.

However, if the year passes, borrowers will be subject to the total debt service ratio (DSR) regulation (for total loans exceeding 200 million KRW). From July of that year, the standard will be tightened to total loans exceeding 100 million KRW.

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