Geumsoyeon: '5 Major Commercial Banks' Earn 1 Trillion Won in Prepayment Fees Over 4 Years

"Early Repayment Fees Must Be Abolished... A Malpractice Blocking Early Repayment"

[Asia Economy Reporter Kwangho Lee] It has been revealed that the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?have earned over 200 billion KRW annually from early repayment fees.

On the 31st, an analysis of data received by the Financial Consumer Federation from Yoon Doo-hyun, a member of the National Assembly's Political Affairs Committee from the People Power Party, showed that over the four years from 2017 to last year, the five major commercial banks collected a total of 1.0488 trillion KRW in early repayment fees on loans.

The earnings were 260.1 billion KRW in 2017, 247.5 billion KRW in 2018, 265.3 billion KRW in 2019, and 275.9 billion KRW last year, generating over 200 billion KRW in revenue each year.

Early repayment fees are penalties imposed on borrowers who repay their loans before maturity, typically around 1% of the loan amount, and they disappear after three years from the loan date.

Regarding early repayment fee rates by bank, for fixed-rate household credit loans, Shinhan Bank applied 0.8%, while KB Kookmin, Woori, Hana, and NH Nonghyup Banks applied 0.7%.

For variable-rate household credit loans, Shinhan and Hana Banks applied 0.7%, while Kookmin, Woori, and NH Nonghyup Banks applied 0.6%. All five major commercial banks applied 1.4% for fixed-rate real estate secured loans and 1.2% for variable-rate loans.

On the other hand, internet-only banks such as KakaoBank do not charge early repayment fees on any loan products. K Bank also does not charge early repayment fees on credit loan plus or emergency fund loan products, which are popular among middle- and low-credit borrowers.

Kang Hyung-gu, Secretary General of the Financial Consumer Federation, pointed out, "Early repayment fees act as obstacles that prevent consumers from switching to lower interest rate products or making early repayments, significantly restricting consumer choice, so these fees should be abolished or greatly reduced."

He added, "From the government's perspective on managing household debt, early repayment should be encouraged by abolishing early repayment fees."