FSS tightens savings banks rulesThe financial watchdog tightened rules on non-financial institutions’ reporting of loans to people with bad credit histories.
The Financial Supervisory Service (FSS) Wednesday ordered local savings banks to enhance their lending information database system by September and to make all document work fully electronic so that borrowing records can be updated constantly.
Savings banks, which in Korea are more like consumer finance companies, cater to low-income, bad-credit borrowers.
The FSS wants other companies to be able to check lending records as soon as possible to keep borrowers with poor credit histories from taking out loans from a number of institutions.
Currently it takes five business days for non-financial institutions to upload lending information on the Korea Credit Information Services database to share with other companies in the industry.
“Commercial banks, which are equipped with an up-to-date information system, can easily check each borrower’s financial records,” Lee Joon-ho, a senior director from FSS, said at a press conference Wednesday. “Savings banks currently don’t have such system.”
The FSS has also told all financial companies to reform the incentives they offer to staff selling financial products by September.
Salespeople are currently rewarded for the new loans they issue each month, driving some to urge customers with poor credit histories to borrow more and at high interest rates. By September, the companies have to change the way incentives are calculated.
Financial companies often outsource their marketing of financial products.
Almost 11,000 sales representatives work for lenders like commercial and savings banks to market loans, 24,000 work for card companies and 412,000 work for insurance companies, according to FSS data as of March.
All card companies will be required to build an electronic registration system by December to prevent leaks of customers’ personal information.
BY KIM JI-YOON [firstname.lastname@example.org]