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Banks required to inform borrowers of rights to loan rate cut
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By Lee Kyung-min
By Lee Kyung-min
Commercial banks and savings banks are seeking ways to better inform customers about when they can apply for a borrowing rate cut, Friday, ahead of a revised bill, which will take effect June 12, bank officials said Friday.
The revision, which will fine 10 million won ($8,400) to lenders that fail to do so, came after brewing criticism that many lenders deliberately withhold the crucial yet often neglected information to secure greater interest income.
Under the revision, employees at lending institutions that fail to inform customers about eligibility criteria will face the fine.
They have to inform borrowers about a possible rate cut if the latter's salary and asset value increased, or if they get promoted.
Corporate customers can do so if their financials or credit rating improves.
The revision came in response to data that showed many customers paid lower interest after requesting a rate cut.
According to data submitted to Rep. Jeon Hae-cheol of the ruling Democratic Party of Korea (DPK) from the Financial Supervisory Service (FSS), and large commercial banks, over 9 trillion won in interest was cut following a renewed credit review request over the past five years.
Over 668,000 requests were approved for the cut between 2013 and August 2018.
The acceptance rate was well over 90 percent, meaning requests made by nine out of ten people on rate cut was granted.
“I was able to have my rate cut, but I cannot speak for others,” said a man who took out 1 billion won in credit loans.
“My borrowing rate was about 4 percent a year, and I saved 200,000 won in annual interest after I applied for a review. Many office workers like me are well-informed about ways to save money, but it may not be the case for older people.”
In response to the criticism, banks are in continued consultation with the Federation of Banks to improve consumer protection.
“Customers should know they are eligible for the rate cut because it is all written in the terms and conditions we give them when their loan request is approved,” said a bank official who refused to be identified.
“We will continue to find ways to better inform customers by strengthening online platforms.”
An official from a local savings bank said he will improve ways to inform borrowers.
“We will try to explain the eligibility criteria more clearly,” he said.