Companies’ decision reflects government move to cope with delinquent loans
Credit card companies decided to lower the interest rates on customers’ overdue payments by a maximum of 1 percentage point.
Their move comes after the Financial Supervisory Service issued a warning against reckless credit card loans with high interest rates.
Major firms ― Shinhan Card, KB Kookmin Card, Samsung Card, Lotte Card and Hana SK Card ― will slash the extra rates on delinquent loans.
Shinhan Card, the nation’s No. 1 issuer, has charged delinquency rates of between 24 percent and 29 percent per annum for customers failing to pay debts within a month after using cash advances, card loans and revolving loans.
The rates on delayed payments will be lowered to between 23 percent and 28.5 percent according to initial lending rates on customers.
Other players will follow suit. In addition, KB Kookmin and Samsung will cut the service fees on installment-based payments.
Samsung Card will lower the service charges on installment payments from the current level of between 10 percent and 21.8 percent to between 5 and 21.8 percent.
With the minimum rate of 5 percent, about 5 million cardholders will enjoy an eased burden.
Tough screening of applications for new credit cards is being carried out as financial authorities strengthen supervision of card firms.
Customers should see monthly payment ceilings on new credit cards slashed sharply compared to the average ceiling on current cards, according to financial regulators.
As part of policymakers’ efforts to curb snowballing household debt, the Financial Services Commission has unveiled measures against reckless issuance and the high delinquency rate in the credit card industry.
The FSC introduced a system to urge card companies to rigidly assess customers’ income, property and credit standing before issuing cards.
Under the system, companies have no choice but to lower customers’ payment ceiling.
The regulator is also instructing issuers to suspend usage of credit cards which remain dormant for more than one year.
Dormant cards with no payment record for more than a year account for 27 percent of the total number of credit cards in the local market.
In addition, procedures for closing credit card accounts have been simplified.
As credit card issuers are in business expansion mode, the FSC and the FSS recently introduced “weekly monitoring.”
Under the instructions, companies have been obliged to set their own guidelines curbing expansion in three major business sectors ― company assets, card issuance and promotion budgets.
By Kim Yon-se (kys@heraldcorp.com)
