If the Right to Request Interest Rate Reduction Is Not Notified, a Fine Will Be Imposed on the 'Bank,' Not Employees

Amendment to the Enforcement Decree of the Banking Act Passed at the Cabinet Meeting
Enhancing Fairness with Savings Banks, Effective the Day After Tomorrow

[Asia Economy Reporter Kim Hyo-jin] From now on, if a bank fails to notify a loan customer of their right to request a lower interest rate, the bank itself, rather than its employees, will be fined.

On the 18th, the Financial Services Commission announced that the amendment to the Enforcement Decree of the Bank Act containing this provision has passed the Cabinet meeting. The amendment will take effect on the 20th.

The current law stipulates that fines are imposed on employees involved in the work.

The financial authorities revised the enforcement decree following criticism that, unlike savings banks or card companies where the fine target is defined as the 'financial company,' the Bank Act defines it as employees, which is inconsistent and could impose excessive burdens on bank employees.

The right to request a lower interest rate refers to the authority to ask for a reduction in loan interest rates when the credit level has improved. Banks must inform customers who intend to enter into a loan contract that they can exercise this right, and failure to do so results in a fine of up to 20 million KRW.

When a customer requests a lower interest rate, the bank must notify them of the result, including whether the rate reduction is granted and the reasons, within 10 days through phone, written documents, text messages, or email after internal review. When requesting a rate reduction, the customer must submit identification documents and supporting evidence that meet the requirements.

For salaried workers, if it is clear that their credit rating has improved due to employment or promotion, and for self-employed individuals or companies, if an increase in income can be clearly proven through increased sales, the likelihood of receiving a rate reduction is high.

In such cases, documents such as a certificate of employment, withholding tax receipt for earned income, income certificate, credit rating data, position change documents, and sales-related tax invoices may be requested.

However, an improved credit level does not automatically guarantee such measures. This is because credit ratings from external credit bureaus (CB) and those from financial institutions' internal evaluations may differ. It is also necessary to consider that internal standards vary among financial companies.

The acceptance rate of interest rate reduction requests in the banking sector is still considered low. From May last year to May this year, the acceptance rate of major commercial banks for such requests remained in the 30% range.

It is analyzed that this is mainly influenced by the fact that about 80% of commercial bank loans are loans such as mortgage loans and jeonse deposit loans, where interest rates are determined based on the condition of the collateral and loan period rather than the borrower's credit rating.

This content was produced with the assistance of AI translation services.