By Na Jeong-ju
Staff Reporter
Large-sized consumer financing firms increased loans by more than 50 percent last year on strong demand for home-backed loans and tougher lending regulations at banks, according to the Financial Supervisory Service (FSS) Sunday.
According to data submitted to lawmakers, the regulator said the combined outstanding loans at 59 consumer financing firms with more than 7 billion won in assets stood at 3.4 trillion won as of the end of last year, up 51 percent, or 1.16 trillion won, from a year ago.
The firms enjoyed an upswing in outstanding loans last year as the government enforced tougher rules to make it more difficult for potential homebuyers to borrow from banks in a bid to stabilize the housing market.
Consumer financing firms usually demand higher borrowing rates than banks, but their loans gained popularity among those who couldn't get loans due to stricter lending rules.
As of the end of 2006, seven out of top 10 consumer financial firms are owned by foreign investors, the data showed.
Peninsula Capital Corp., of which Merrill Lynch is the largest shareholder, increased loans by more than 500 billion won last year, marking the fastest growth among its peers. It had some 700 billion won in outstanding loans as of the end of June.
Japanese-owned Sanwa Money came next with an increase of 99 billion won in loans, followed by KT Rental with 81 billion won and Partner Credit with 78 billion won.
Encouraged by the fast growth of consumer financing firms, major banks are seeking to advance into the subprime loan market for those who are not serviced at banks due to bad credit records. Kookmin Bank, Shinhan Bank, Woori Bank and Hana Bank have stepped up preparations to get business licenses for the riskier loan market.
Woori recently took over Hanmi Capital, a consumer financing firm, and said it also will start subprime lending. Shinhan also is taking steps to enter the riskier loan market through its consumer financing unit, Shinhan Capital.
According to the financial regulator, it is estimated that more than five million people are using consumer financing firms to borrow money because they are not accepted at banks.