Controversy Over ShinHyup Loan Fixed Interest Rate Hike... Financial Supervisory Service Also Intervenes (Comprehensive)

Official letter sent by Cheongju Sangdang Credit Cooperative to borrowers. Photo by Online Community Capture

[Asia Economy Reporter Buaeri] Amid an incident where a regional credit cooperative sent and then withdrew a notice to raise fixed loan interest rates, the Financial Supervisory Service (FSS) has issued a cautionary directive to all mutual finance institutions to prevent such cases from occurring.

According to financial sources on the 29th, Cheongju Sangdang Credit Cooperative recently notified fixed-rate loan customers through a "Notice on Loan Interest Rate Changes" that the interest rate would be raised from 2.5% per annum to 4.5%.

In the official letter, Cheongju Sangdang Credit Cooperative stated, "The Bank of Korea has raised the base interest rate since August last year, currently up to 3.25%, and mortgage loan rates at commercial banks are approaching the 8% range, causing a rapid change in the financial environment," adding, "We intend to change the interest rates on loans with fixed rates."

The cooperative based this on the Credit Union Basic Loan Transaction Terms, which state that "before the completion of debt fulfillment, if there is a significant change in circumstances unforeseeable at the time of contract due to rapid changes in the national economy or financial conditions, the cooperative may increase or decrease the rate by individual notification to the debtor."

Cheongju Sangdang Credit Cooperative specified that the fixed-rate change would be applied starting January next year, and it is known that 136 customers received the fixed-rate increase notice, with loan amounts totaling approximately 34.2 billion KRW.

The FSS ordered Cheongju Sangdang Credit Cooperative to withdraw the fixed-rate increase.

An FSS official stated, "Raising fixed interest rates before maturity under the Basic Loan Transaction Terms is applicable only in limited situations such as natural disasters or foreign exchange liquidity crises. It is not appropriate to apply it solely based on the current trend of interest rate hikes," adding, "All financial companies need to be cautious not to unilaterally raise fixed loan interest rates based on these terms."

As the controversy continued, the cooperative sent text messages to borrowers informing them of the withdrawal of the loan interest rate change and offering an apology.

A representative from the National Credit Union Federation of Korea said, "The cooperative sent notification texts to borrowers and plans to send apology letters and notices by mail within today," adding, "The federation has also sent guidance and notices to the cooperatives."

Meanwhile, amid the high-interest rate period, incidents have been occurring repeatedly in the mutual finance sector. Including Donggyeongju Nonghyup and Jeju Sara Credit Union, some cooperatives offered special high-interest promotions, which led to excessive inflows of funds and situations where cancellations were desperately requested, causing controversy.

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