The Financial Supervisory Service said Tuesday that it would ease the burden on consumers by instructing banks to slash additional interest rates on overdue loans.
The measure comes as part of the regulator’s policy to enhance consumer rights while low- and middle-income households suffer from high additional rates on overdue payments.
The regulator has decided to lower the rane of allowable rates on overdue lending which range between 14 and 21 percent.
“The measure is aimed at instructing banks to lower the rates by 1 percentage point on average,” a senior FSS official told a news briefing.
Should banks slash the rate by 1 percentage point, consumers will see their interest burden reduced by 100 billion won ($92.5 million) per annum, he said.
The FSS has also decided to eliminate the interest on deposit-collateralized overdue loans in the commercial banking sector.
While regulatory officials plan to unveil a series of measures to protect consumer rights until late this month, they have yet to announce the details of a policy to pressure banks to slash service fees including those on transactions via automated teller machines.
Households have been suffering high service fees on their money transfers and withdrawals via ATMs and the financial watchdog has been accused of negligent oversight over the practice.
For the insurance sector, the FSS is set to unveil measures later next week, which will involve slashing payments to insurance salespeople.
The service fees, or payments, to salespeople have been linked to higher insurance premiums for policyholders.
Regulatory measures to protect retail stock investors are expected to come in mid-September.
Many brokerage firms have been criticized for offering interest rates of less than 1 percent on customers’ deposits for investments, while the firms enjoyed interest rates of more than 3 percent by entrusting the money with the Korea Securities Finance Corp.
Other measures will include action against fees on stock-collateralized loans and wrap account products.
Measures for credit card holders may instruct credit card companies to lower fees to be charged on member stores for customers’ credit card use.
In a similar vein, FSS Gov. Kwon Hyouk-se expressed his willingness to take stern disciplinary measures against irregular practices of several lenders.
He has instructed the FSS staff to bolster efforts to protect consumer rights by stepping up the crackdown on irregular loan issuances.
By Kim Yon-se (
kys@heraldcorp.com)
