From the 5th of next month, exercise of the right to request interest rate reduction at NongHyup, SuHyup, and others

[Asia Economy Reporter Song Hwajeong] Starting from the 5th of next month, the right to request interest rate reductions will be applicable to mutual finance cooperatives such as Credit Unions, Nonghyup, Suhyup, and the Korea Forest Cooperatives Federation, as well as their central associations.

On the 28th, the Financial Services Commission announced that the amendment to the Enforcement Decree of the Credit Cooperatives Act (Credit Union Act) was passed at the Cabinet meeting. The amendment related to the right to request interest rate reductions will take effect from the 5th of next month, in line with the enforcement date of the law.

Following the legalization of the right to request interest rate reductions for mutual finance sector cooperatives and central associations in January, the Financial Services Commission sought to specify detailed requirements and procedures for such requests delegated from the Credit Union Act to the Enforcement Decree, and thus pursued the amendment of the Enforcement Decree.

The amendment to the Enforcement Decree of the Credit Union Act stipulates detailed requirements and procedures for requesting interest rate reductions. Individuals who have entered into contracts such as loans with cooperatives or central associations may request an interest rate reduction if there is recognized improvement in their credit status, such as employment, promotion, increase in assets, or rise in personal credit score. In the case of corporations and individual business owners, requests for interest rate reductions can be made if there is recognized improvement in financial condition, credit rating, or personal credit score. Cooperatives and central associations must notify the acceptance or reasons for rejection of the interest rate reduction request within 10 business days by phone, in writing, text message, email, or similar methods. Additionally, if cooperatives or central associations fail to inform that the interest rate reduction can be requested, a fine of 10 million KRW will be imposed.

Furthermore, in accordance with the Ministry of Government Legislation’s revision of outdated licensing standards, the minimum area requirement for physical facilities in the approval of Credit Union establishment has been revised. Accordingly, the minimum area standard for physical facilities in the establishment approval of Credit Unions has been removed, and instead, sufficient space necessary for business operations must be secured.

A Financial Services Commission official stated, "Through this amendment to the Enforcement Decree of the Credit Union Act, we expect a reduction in the interest burden on financial consumers and an improvement in regulatory fairness among financial sectors," adding, "We will also promptly complete the amendment of the Mutual Finance Business Supervision Regulations currently underway alongside the amendment of the Credit Union Act Enforcement Decree."