Coupang seller loans spark controversy over high interest

(News1)

A seller loan product offered by Coupang Financial is drawing controversy for charging interest rates of up to 18.9 percent despite operating in effect as a collateral-backed loan, with sellers’ settlement receivables tied to repayment. Since its launch about six months ago, the product has been sold in nearly 2,000 cases, with cumulative lending reaching 18.2 billion won ($12.6 million).

According to data submitted by the Financial Supervisory Service to the office of Rep. Kang Min-guk of the National Assembly’s Political Affairs Committee, the “Coupang Seller Growth Loan” recorded 1,958 loans from its launch in late July through December last year, with cumulative lending reaching 18.17 billion won.

Outstanding loan balances stood at 13.41 billion won as of the end of last year, while new sales of the product were temporarily suspended starting Dec. 29.

The loan allows eligible Coupang sellers to borrow up to 50 million won, with annual interest rates of up to 18.9 percent. In the event of delinquency, Coupang settlement proceeds owed to sellers are used as collateral to recover both principal and interest.

Monthly interest rates rose steadily over the period, standing at 14.0 percent in July, 13.6 percent in August, 13.8 percent in September, 14.0 percent in October, 14.3 percent in November and 14.3 percent in December, with the average rate from July through December calculated at 14.1 percent.

Applying the average rate to loan balances at the end of December and factoring in the roughly five-month operating period, estimated interest income is believed to have reached between 700 million won and 800 million won.

The Financial Supervisory Service is reviewing whether the company applied excessively high interest rates by leveraging its dominant position as a major e-commerce platform. After issuing a preliminary inspection notice to Coupang Financial on Jan. 7, the watchdog plans to begin an on-site inspection on Jan. 15.

A key point of contention is whether the product was marketed as an unsecured credit loan despite effectively tying sellers’ settlement receivables to repayment. Regulators are also examining whether the automatic repayment mechanism — which deducts 5 percent to 15 percent of sellers’ Coupang sales on settlement dates to cover loan payments — may violate South Korea’s Financial Consumer Protection Act.

(News1)

Authorities are expected to assess whether the potential impact of such automatic deductions on sellers’ cash flow and business operations was adequately disclosed to borrowers.

An FSS official said the agency would “closely examine the appropriateness of interest rate calculations, as well as whether the loan’s origination and repayment structure comply with financial consumer protection regulations.”

Coupang has defended the product, arguing that high interest rates were unavoidable because the loans target underbanked sellers, including those with mid-to-low credit scores. According to Coupang Financial, 89.4 percent of borrowers fall into the lower half of credit scores, while 48.9 percent generate average monthly sales of less than 10 million won.

The company added that as a specialized credit finance firm, its business model necessitates higher rates than commercial banks, claiming the pricing is comparable to those offered by nonbank and secondary financial institutions.

Critics counter that eligibility requirements — including monthly sales of at least 500,000 won and a minimum six-month sales history on Coupang — indicate that borrowers already demonstrate a certain level of business stability, with platform settlement structures absorbing much of the credit risk.

Rep. Kang also pointed to competitors, noting that Naver Financial operates three loan products for Smart Store sellers, all of which carry lower interest rates than Coupang Financial’s offering.

By comparison, loan products offered by Mirae Asset Capital recorded an average annual interest rate of 12.4 percent last year, while loans from Woori Bank averaged 6.89 percent and those from IBK Industrial Bank of Korea averaged 3.94 percent.

“Under the pretext of helping low-credit sellers on the Coupang platform access financing, the company effectively engaged in predatory lending by charging interest rates of up to 18.9 percent,” Rep. Kang said.