Bank customers file suit over alleged rate-fixing

Three customers have filed a compensation suit against local banks, arguing that they suffered damage from the banks' alleged collusion to rig interest rates on certificates of deposit (CD) that are tied to interest rates on home mortgage loans, court sources said Thursday.

The lawsuit is the first to be filed since the Fair Trade Commission (FTC), the country's anti-trust watchdog, began looking into major banks and brokerage houses over the supposed rate-rigging last month.

A CD is a financial instrument sold by banks and circulated in secondary markets by securities firms. Most bank mortgage loans are tied to CD rates, raising chances that higher CD rates might contribute to increased debt-repaying burdens for households.

Similar suits are likely to follow as several local consumer advocacy groups, including the Financial Consumer Agency, are also considering legal actions.

In the lawsuit filed with the Seoul Central District Court, three plaintiffs, including the borrower surnamed Lee, demanded compensation worth some 7 million won ($6,200) for each person from Kookmin Bank, the country's largest lender, and Hana Bank, according to the sources.

The three argued that the collusion violated the monopoly regulation and fair trade law.

Lee said he borrowed 1.4 billion won from Hana Bank last year, and the two others said they applied for loans worth 99 million won and 50 million won, respectively, from Kookmin Bank. The two banks are among the nine financial institutions that are under FTC investigation.

"We suspect that the banks have raised or fixed rates on the CDs after sharing information between banks through meetings, unofficial gatherings, and working-level talks," the plaintiffs were quoted as saying in the petition.

The suspected rate-fixing may have contributed to increasing households' debt-serving burden, they argued.

Currently, the CD rates are announced twice a day via quotations by 10 local securities firms based on CDs sold by seven banks.

The probe came as the CD rates remained relatively high even as other market rates fell amid the slowing economy and prospects for a rate cut by the central bank.

Household lending handled by local banks and non-bank institutions totaled a record 642.7 trillion won at the end of May, according to data by the Central Bank. (Yonhap News)