Value context and insight. lkm@koreatimes.co.kr
'Commercial banks willfully neglect consumers' right to cheaper financing'
A man walks past a sign that promotes Kakao Bank in Seoul. Korea Times file
By Lee Kyung-min
By Lee Kyung-min
Commercial banks faced criticism Monday for allegedly not actively informing customers when they can seek a borrowing rate cut, in what many borrowers consider an underhanded move seeking greater interest income.
Borrowers are allowed to ask lenders for a reduced rate if their credit improves following an increase in income or asset value or a reduction in debt. Lenders must respond no later than 10 days after receiving a request with the specifics on why the request was granted or denied. The measure aimed at defending the best interests of consumers has been effective since June 2019.
Those who took out credit-based loans from the country's top commercial banks ― KB Kookmin, Shinhan, Woori, Hana and Nonghyup ― do not receive any regular notification about changes in their credit status, a basis for seeking a lower borrowing rate.
“We do not necessarily send texts or emails to customers that saw changes in credit,” an official from one commercial lender said. “We let them know if they have met our requirements only after submitting requests for a rate cut.”
The defensive response contrasts with those from Kakao Bank ― one of the country's first internet-only banks ― as it sends customers text messages every quarter about their changed eligibility.
“We send them text messages to make it easier for them to apply for a lower rate on our online platform,” a Kakao official said. “It is not only a customer's right that is more often than not neglected but also relevant details that actually help them financially. We are providing services they need most.”
The five leading lenders received about 150,000 requests between June 2019 and May 2020, whereas Kakao saw the number exceed 100,000 in the same period. Of them, over 80 percent of requests were granted by the internet bank, with customers saving a combined 3 billion won ($2.4 million) in interest costs. Only 35.4 percent were accepted by the five lenders.
Existing legacy banks say the low acceptance rate stems mostly from requests filed by mortgage loan takers not eligible for the rate cut. But they fell short of introducing strengthened customer service as Kakao has done to better help them seek cheap financing.
“We do not have any immediate plans to change the current system,” the official said.
The deliberate inaction will certainly entail fierce criticism given major lenders lowered over 9 trillion won in interest between 2013 and 2018 when borrowers sought cuts.
This means many borrowers remained uninformed of their rights and had been subsequently taken advantage of by the lenders that do not feel the need to diminish their otherwise stable source of revenue.