'Joodamdae' Also Switches to Cheaper Online Loans... Infrastructure to Be Established Within the Year

Credit Loan Refinancing System Under Development for May Target
Participation from 53 Financial Companies and 23 Comparison Platforms

The financial authorities are planning to expand the scope of the 'online one-stop refinancing loan system'?currently being developed to allow financial consumers to easily switch to loan products with lower interest rates?from personal credit loans to include mortgage loans.

The Financial Services Commission (FSC) announced on the 9th that this decision was made following the second working-level meeting of the 'Banking Sector Management, Sales Practices, and System Improvement Task Force (TF)' held on the 8th at the Government Seoul Office in Jongno-gu, Seoul.

The FSC is currently building an infrastructure for refinancing loans targeting personal credit loans, aiming to launch in May, which will enable consumers to easily move to loans with lower interest rates. The authorities are establishing a loan transfer system that intermediates and digitizes repayment procedures?previously conducted offline between financial companies?through the Financial Settlement Network, while also improving the platform.

The refinancing loan system will involve 53 financial companies (19 banks, 18 savings banks, 7 card companies, and 9 capital companies) that currently hold 90% of the entire credit loan market, as well as 23 platforms (fintech, big tech, and financial companies) that account for 95% of the loan comparison market.

The authorities plan to alleviate the burden on financial consumers by encouraging financial companies to set reasonable fees paid to platform operators. Additionally, through voluntary agreements, platform operators will be prevented from discriminating against financial companies without reasonable grounds, and specific disclosure of fee rates by industry and product will be mandated to help consumers accurately understand the costs.

Furthermore, the authorities will ensure that financial consumers can accurately identify prepayment penalties and repayment eligibility on refinancing loan platforms. Currently, consumers can only check partial information such as principal and interest of existing loans through loan comparison platforms, but the newly established platform will allow consumers to apply for refinancing after preemptively confirming prepayment penalties and repayment eligibility through information provided by the financial sector.

The FSC is also pursuing plans to expand the refinancing loan system, currently limited to credit loans, to mortgage loans within this year. The aim is to promote competition within the financial sector by enabling interest rate comparisons for mortgage loans, which are used by the majority of the population. According to the Bank of Korea, as of January, mortgage loans accounted for approximately 76% (798.8 trillion KRW) of the total household loan balance of 1,053.4 trillion KRW at banks.

However, the authorities recognize that refinancing mortgage loans involves procedures such as registration transfer in addition to computerized loan repayment, making it difficult to implement all processes entirely online.

Accordingly, the authorities have decided to prioritize building infrastructure that allows consumers to compare mortgage loan products and apply for refinancing loans online, aiming to maximize consumer convenience. They plan to consult with the financial sector and others as soon as possible to establish a system that enables refinancing mortgage loans through platforms by December this year.

Kim So-young, Vice Chairman of the FSC, stated, "Since the refinancing loan infrastructure, along with loan comparison platforms, is essential for reducing the public's interest burden, we ask for active efforts to ensure smooth implementation and enhance consumer benefits. Particularly, although there are various issues such as real estate registration transfers in building the mortgage loan infrastructure, we must promptly devise measures to alleviate the burden on citizens suffering from high interest rates."

Kim So-young, Vice Chairman of the Financial Services Commission, is making an interim announcement on the 'Recruitment of Institutions Handling Youth Leap Accounts and Operation Directions' at the Government Seoul Office in Jongno-gu, Seoul, on the 7th. Photo by Yoon Dong-joo doso7@