Mutual Finance Industry Will Also Be Able to Request Interest Rate Reduction Rights

Amendment to the Credit Union Act Passed in the National Assembly Plenary Session

[Asia Economy Reporter Kim Jin-ho] As loan interest rates rise, consumer complaints are increasing, and the right to request interest rate reductions for mutual finance businesses will be legalized.

According to the Financial Services Commission on the 9th, the "Amendment to the Credit Cooperatives Act," which legalizes the right to request interest rate reductions for mutual finance sector cooperatives and central associations, has passed the plenary session of the National Assembly.

The right to request interest rate reductions for mutual finance sector cooperatives and central associations has only been implemented through administrative guidance. Accordingly, even if mutual finance sector cooperatives and central associations violated obligations related to the right to request interest rate reductions, there was no basis for punishment.

However, with the passage of the amendment, those who have signed contracts such as loans with mutual finance sector cooperatives and central associations can now request interest rate reductions under the Credit Cooperatives Act if their credit status has improved. Additionally, mutual finance sector cooperatives and central associations must inform financial consumers who intend to enter into contracts such as loans that they have the right to request interest rate reductions. Failure to fulfill this notification obligation will result in a fine of up to 20 million KRW.

A Financial Services Commission official explained, "By elevating the right to request interest rate reductions for mutual finance sectors, which had been operated through administrative guidance, to a right guaranteed by law, it is expected to reduce the interest burden on financial consumers, protect their rights and interests, and contribute to regulatory fairness among financial sectors."

The Credit Cooperatives Act is scheduled to be enforced six months after its promulgation. The government plans to revise subordinate regulations such as the Enforcement Decree of the Credit Cooperatives Act and the Mutual Finance Business Supervision Regulations in line with the implementation timing of the amended law.

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