South Korea’s Financial Supervisory Commission reportedly is warning credit card companies in that country against offering personal cash loans to their cardholders.
Credit card companies this year as of Aug 31 loaned 14.1 trillion won (US$460 billion or 332 billion euros) to cardholders, up 23.7% from 11.4 trillion won a year earlier, the regulator says. That total surpassed the 12.5 trillion won banks loaned during the first eight months of this year, which represented a 3.3% increase from 12.1 trillion won banks loaned during the same period last year.
Borrowing money from credit card firms is much easier than taking out a loan from banks, according to an official at the Credit Finance Association of Korea, an umbrella organization representing card issuers and other lenders.
As such, the lending system the card firms use may produce bad loans, the commission contends. The regulator has said that it will keep a close watch on the risks, though the default rates on them are still low at 1%.
“Cardholders can get money from credit card issuers over the telephone or the Internet, while at banks they need to stop by in person and fill forms out,” the association official tells PaymentsSource.
Card issuers have made plans to make loans a major part of their portfolios after the reduction and abolition of handling charges (see story).
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