Consumers get monthly interest info

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Consumers get monthly interest info


As part of efforts to increase transparency in the banking sector, the Korea Federation of Banks (KFB) has decided to regularly post a table on its Web site comparing loan interest rates based on different creditworthiness of households and small and medium-size enterprises. The move comes amid growing complaints over the lack of information available to borrowers.

According to the KFB, its first post was uploaded yesterday with information dealing with the range of loan interest rates offered by banks to households and SMEs depending on the type of loan product they choose and their creditworthiness.

There will be an updated post every month. It is the first time such information is being provided to consumers. Until now, they were only given information concerning the lowest and highest interest rates of loan products.

“With the service, we expect financial consumers to learn specific information on the interest rates before receiving loans from banks,” said an official from the federation. “They will be given more options for choosing banks and we expect the interest burden on them to be partially reduced.”

The information will include 17 commercial banks’ base interest rates and interest rate spreads, which refers to added interest depending on the borrowers’ creditworthiness in six categories. Household borrowers will have access to different interest rates for mortgage-secured loans of either installment or lump sum repayment as well as for credit loans.

For SMEs, their rates will differ depending on whether they receive warranty or collateral secured loans and credit loans.

According to the KFB’s compiled data, the average interest rate on household credit loans was highest for Standard Chartered Bank Korea (11.1 percent), followed by Citibank (7.82 percent). The interest rate spread of loans given to SMEs was highest for Korea Exchange Bank. The Supreme Prosecutors’ Office raided KEB headquarters this week over suspicions that the bank manipulated spreads for SMEs. KEB is alleged to have improperly raised 18 billion won ($16.1 million).

Meanwhile, the Financial Consumer Agency said yesterday in a release that it will file a class action suit against commercial banks for high interest rate spreads on loans.

“We urge [the financial regulator and the prosecution] to expand their investigations into other banks in addition to KEB,” it said. “We plan to receive damage claims and have banks pay back additional loan interest they received from their customers.”

By Lee Eun-joo []
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