Card and Capital Companies Apply Retroactive Reduction of Maximum Interest Rates... "Approximately 116.7 Billion Won in Benefits"

Reduction of Legal Maximum Interest Rate from July 7
Interest Rate Lowered to Below 20% for New, Renewal, Extension Contracts
and Existing Customers

[Asia Economy Reporter Ki Ha-young] The card and capital industries will lower interest rates to below 20% per annum for existing customers in accordance with the statutory maximum interest rate reduction effective from the 7th of next month.

The Korea Federation of Credit Finance Companies announced that specialized credit finance companies such as card and capital companies will voluntarily apply interest rate reductions to existing customers in line with the statutory maximum interest rate reduction effective from the 7th of next month. This is to share the burden with economically struggling low-income earners due to COVID-19 and to fulfill their social responsibilities as financial institutions.

From July 7th, the statutory maximum interest rate will be lowered from 24% to 20% per annum according to the revision of the Enforcement Decree of the Loan Business Act. In principle, the maximum interest rate reduction applies to newly concluded, renewed, or extended contracts. Applying the reduced interest rate to existing customers is not a mandatory institutional requirement.

With this measure, approximately 2.64 million borrowers currently using specialized credit finance companies?including card users (cash services, card loans, revolving credit, etc.) and capital users (credit loans, etc.)?are estimated to benefit by about 116.7 billion KRW in total. Assuming these borrowers fully repay at maturity without early repayment as of the end of March this year, the card sector is expected to see an interest rate reduction effect of about 81.6 billion KRW, and the capital sector about 35 billion KRW.

A representative from the Korea Federation of Credit Finance Companies stated, "Credit finance companies will provide guidance on this matter through their websites, and existing customers will be able to receive the reduced interest rates without any separate application process," adding, "We will actively cooperate to minimize financial difficulties for low-income earners through the maximum interest rate reduction implementation task force involving financial authorities and financial associations."