500 Billion KRW in Prepayment Penalty Fees Income from the Four Major Banks Over the Past 3 Years

[Asia Economy Reporter Song Hwajeong] Amid the increasing burden on ordinary citizens due to continued interest rate hikes, it has been revealed that the four major banks' income from early repayment fees has reached 500 billion KRW since 2020.

According to the National Assembly audit data from the Financial Supervisory Service on the 13th, the total income from early repayment fees of the four major banks?KB Kookmin, Shinhan, Woori, and Hana?amounted to 522.6 billion KRW from 2020 to July of this year.

By bank, KB Kookmin Bank recorded the highest at 155.851 billion KRW, followed by Hana Bank with 132.633 billion KRW, Woori Bank with 118.953 billion KRW, and Shinhan Bank with 115.172 billion KRW.

Early repayment fees are a type of penalty charged to borrowers who repay their loans before maturity, imposed to reduce the risk of fund management due to maturity mismatches. As interest rates have continued to rise recently, consumers who want to reduce their interest burden by repaying loans early are hindered by these fees. Moreover, with banks posting record-breaking profits and maintaining sound financial health, there are criticisms that income from early repayment fees is excessive.

However, the income from early repayment fees of banks has been on a declining trend since 2020. KB Kookmin Bank's income from early repayment fees exceeded 70 billion KRW in 2020 but decreased to about 57 billion KRW last year. This year is expected to be at a similar level to last year. Shinhan Bank's income fell from 48 billion KRW in 2020 to 41.2 billion KRW last year, Woori Bank's from 51.3 billion KRW to 43.2 billion KRW, and Hana Bank's from 57.9 billion KRW to 49.3 billion KRW.

This decline in income from early repayment fees appears to be influenced by internet banks not charging such fees. KakaoBank and Toss Bank exempt early repayment fees, while K Bank charges early repayment fees ranging from 0.7% to 1.4% on some household loan products. K Bank's income from early repayment fees was 1.513 billion KRW last year and 459 million KRW up to July this year.