Request for interest rate reduction
Requirements for requesting interest rate reduction- Individuals who have entered into a credit provision contract with a bank can request a reduction in interest rates from the bank if they meet the requirements specified below, depending on the category (Article 30-2(1) of the Banking Act; Article 18-4(1) of the Enforcement Decree of the Banking Act):
|
Category |
Requirements |
|
Individual |
Recognized improvement in credit status such as employment, promotion, increase in assets, or rise in personal credit rating |
|
Non-individual (including individual entrepreneurs) |
Recognized improvement in credit status such as improved financial condition, credit rating, or rise in personal credit rating |
※ Banks must inform those intending to enter into a credit provision contract of their right to request an interest rate reduction. Violation can result in an administrative fine of up to KRW 20 million (Articles 30-2(2) and 69(4) of the Banking Act).
※ Banks must provide guidance on the requirements and procedures for recognizing requests for interest rate reductions using means such as their internet websites (Article 25-4(3) of the Banking Business Supervision Regulations).
Review of requests for interest rate reduction- When a bank receives a request for an interest rate reduction, it may consider the following matters in determining whether to accept the request and may require the submission of documents necessary to verify the improvement of the requester’s credit status (Article 18-4(2) of the Enforcement Decree of the Banking Act; Article 25-4(1) and (2) of the Banking Business Supervision Regulations):
1. If the credit status of the party who entered into the credit provision contract did not affect the determination of the interest rate at the time of the contract; or
2. If the improvement in credit status is minor and does not affect the redetermination of the interest rate.
Notification of acceptance or rejection of interest rate reduction request- From the day a bank receives a request for an interest rate reduction within 10 business days (excluding the period from the day when supplementary documents are requested to the day they are submitted), the bank must inform the requester of the acceptance or rejection of the request and the reason for it via phone, written notice, text message, email, fax, or other similar methods (Article 18-4(3) of the Enforcement Decree of the Banking Act).