Will Interest Rates on Emergency Loans for Ordinary People Decrease? Authorities Say "Top Loan Companies Can Get Low-Interest Loans from Commercial Banks"

Loan Companies Halt New Loans Due to Legal Maximum Interest Rate During Rate Hike Period
Low-Credit Borrowers Turn to Illegal Loan Industry
Policy to Lower Loan Companies' Funding Interest Rates

On the 6th, at the Financial Services Commission and Financial Supervisory Service insurance industry CEO meeting held at the Government Seoul Office in Jongno-gu, Seoul, Kim Ju-hyun, Chairman of the Financial Services Commission (right), and Lee Bok-hyun, Governor of the Financial Supervisory Service, are entering the meeting room. The meeting was held privately. Photo by Jo Yong-jun jun21@

The financial authorities plan to enable legitimate lending companies to procure loan funds from commercial banks at lower interest rates through the 'Excellent Microfinance Lending Business Operator System.' This measure comes as lending companies have reduced new loans due to the 20% legal maximum interest rate cap during the interest rate hike period, leaving low-credit borrowers no choice but to borrow from illegal loan sharks. The Financial Services Commission and the Financial Supervisory Service will identify the loan status of excellent lending operators to low-credit borrowers and form a consultative body with commercial banks and others to provide support.

On the 13th, the financial authorities announced, "We will support excellent lending operators to make efforts to supply credit to low-credit borrowers." The core of this system is to support microfinance supply by allowing registered lending operators who meet the loan requirements for the bottom 10% credit score low-credit borrowers to borrow funds from commercial banks.

A lending operator can be selected as an excellent lending operator if the outstanding balance of credit loans to low-credit borrowers is 10 billion KRW or more, or if the proportion of loans to low-credit borrowers is 70% or higher. However, the operator must not have been fined or suspended from business for violating financial laws in the past three years.

If the outstanding balance of credit loans to low-credit borrowers meets the balance requirement (80% of the previous half-year balance, 90% upon selection) or the ratio requirement (the outstanding balance of low-credit individual credit loans is 60% or more of the total loan balance of the company), the operator can maintain the excellent lending operator status.

If the operator fails to meet the maintenance requirements for two consecutive terms, their selection will be canceled. According to the recent Financial Supervisory Service review, most of the excellent lending operators (18 out of 25 companies) have maintained credit supply to low-credit borrowers and fulfilled their roles.

However, some companies (7 companies) are scheduled to have their selection canceled due to failing to meet the maintenance requirements for two consecutive terms, caused by a reduction in credit supply to low-credit borrowers. One company that meets the selection criteria will be newly selected. The financial authorities stated, "The excellent lending operators based on the second half of this year's review will be disclosed as 19 companies."

Through this, commercial banks will be able to easily identify excellent lending companies with high credit supply performance to low-credit borrowers and reflect this information in loan screening. The policy goal is to increase loans to low-credit borrowers by enhancing the reputation of excellent lending operators based on their performance.

The financial authorities plan to form a consultative body involving commercial banks, savings banks, specialized credit finance companies, and lending companies that supply loan funds to lending operators.

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