[2023 National Audit] "Prepaying Loans Incurs Excessive Fees"… Financial Supervisory Service Complaints Surge Due to Rising Interest Rates

As Interest Rates Rise and Economy Worsens,
Complaints to Financial Supervisory Service Surge in Banks and Small Business Sectors

Office worker Kim Jimin (38) took out a credit loan with an interest rate of 4.12% from an internet bank in June 2021. However, last early summer, after receiving a text message that the interest rate would rise to 6.8%, she decided to repay her debt first. Kim said, "The interest rate has risen so much that I simply cannot afford the interest, so when I tried to make an early repayment, they told me I had to pay a fee," expressing her dissatisfaction, "I have never been late and have paid both interest and principal, but now they want me to pay an early repayment fee as well. Isn't that too much?"

As the interest rate hike period continues, complaints about bank loans filed with the Financial Supervisory Service have shown a significant increase compared to last year. As the economy worsens, complaints from the small and low-income sectors have also noticeably increased.

Number of Loan Complaints Already Surpasses Last Year’s Total in the First Half of This Year

According to the 'Status of Complaints Received by the Financial Supervisory Service in the Last 3 Years' included in the Financial Supervisory Service’s National Assembly audit report on the 17th, a total of 8,486 bank complaints were received by the first half of this year. This figure is already close to last year’s total of 10,904 cases. The sharp increase in bank complaints was mainly due to loans. Among bank complaints, especially credit-related complaints reached 4,665 cases in the first half of this year alone, surpassing last year’s total of 3,726 cases.

A representative from a commercial bank said, "Since the end of last year, interest rates have skyrocketed, increasing the burden for those with variable-rate mortgage loans or those whose credit loans matured, and this impact has continued into the first half of this year, causing a surge in loan-related complaints."

As seen in Kim’s case, dissatisfaction with early repayment fees is one of the representative bank complaints pointed out by the Financial Supervisory Service. This issue was also raised during the Financial Services Commission’s National Assembly audit held on the 11th. At that time, Cho Eungcheon, a member of the Democratic Party of Korea, pointed out, "Banks pay only a tiny amount of interest when deposits are canceled, but charge high fees for early loan repayments," adding, "The financial authorities need to review whether early repayment fees are being reasonably calculated."

According to calculations by Cho’s office, if a customer takes out a 100 million KRW credit loan and repays it in full after 5 months, applying an early repayment fee rate of 0.6%, the customer must pay the bank 266,600 KRW as a fee. On the other hand, if the customer cancels a 100 million KRW fixed deposit after 5 months, applying the base interest rate of 0.95% and a differential rate, the customer receives only 82,470 KRW in interest from the bank. Regarding this, Chairman Kim Joo-hyun stated, "We will review the early repayment fee calculation system."

Complaints from Small and Low-Income Sectors Also Increasing

Complaints from the small and low-income sectors are also increasing at a rate comparable to banks. In the first half of this year alone, 15,704 cases were recorded. If this trend continues, the total is expected to exceed last year’s 10,725 cases by the end of this year. Specifically, complaints in almost all areas, including 'credit cards' (5,736 cases last year → 4,342 cases in the first half of this year), 'credit' (3,565 → 2,504), and 'credit information' (1,715 → 1,176), are likely to surpass last year’s levels by the second half of this year.

In terms of total complaint numbers, non-life insurance still had the most. In the first half of this year, non-life insurance complaints totaled 17,866 cases. At this pace, it is expected to be similar to or slightly exceed last year’s total of 35,157 cases. Among non-life insurance complaints, those related to 'insurance claim calculation and payment' were the highest at 9,254 cases. The area concerning exemption and liability decisions related to insurance claim payments followed with 2,004 cases.