Inadequate Operation of Interest Rate Reduction Request Rights... Financial Supervisory Service Demands Improvement from Hana Bank

Inadequate Refund Procedures for Excessive Interest Detected
Hana Bank "Improvement Measures Already Completed"

[Asia Economy Reporter Minwoo Lee] The Financial Supervisory Service (FSS) has pointed out issues in Hana Bank's operation of the right to request interest rate reduction. It demanded improvements, stating that the bank failed to properly refund excessively collected interest.

According to financial authorities on the 30th, the FSS recently inspected Hana Bank and identified unreasonable aspects in record management and IT controls related to the operation of the interest rate reduction request system, subsequently requesting improvements in work procedures.

The FSS inspection revealed that Hana Bank had not established refund standards and procedures for returning excessively collected interest from customers. As a result, it was found that refund interest amounts varied by department. Accordingly, the FSS recommended that Hana Bank establish and operate a refund work manual covering delayed compensation payment standards and procedures for verifying withholding tax, and adopt a standardized formula for calculating refund interest.

Additionally, Hana Bank lacked standards and procedures to verify the receipt of supporting documents related to the acceptance and review results of interest rate reduction requests. The bank is required to notify customers of acceptance or rejection and the reasons within 10 business days from the date of receiving the request. It was revealed that Hana Bank's control procedures to comply with this deadline were insufficient.

It was also pointed out that when accepting interest rate reduction requests, preferential interest rate adjustments through branches or headquarters departments were possible, raising concerns that the extent of the rate reduction could be diminished. Therefore, the FSS demanded improvements in work procedures, such as implementing IT controls to ensure that preferential interest rates provided at the time of loan handling are not disadvantageously adjusted for customers when the interest rate reduction request is accepted.

The right to request an interest rate reduction allows borrowers to demand a lower interest rate from financial institutions when their assets increase or credit score improves. The National Assembly and government legislated this system in June 2019.

A Hana Bank official explained, "This was an issue pointed out during the inspection conducted in 2020, a transitional period after the system was introduced in 2019," adding, "All improvement measures have already been completed."

Meanwhile, according to data submitted by the FSS to Rep. Changhyun Yoon of the People Power Party, the total number of interest rate reduction requests received by major commercial banks, regional banks, and internet banks last year was 880,247. Of these, 26.6% (234,652 cases) were accepted, which is 1.6 percentage points lower than the previous year's rate of 28.2%.

Last year, among commercial banks, Shinhan Bank had the lowest acceptance rate for interest rate reduction requests at 33.3%, followed by KB Kookmin Bank (38.8%), Hana Bank (58.5%), Woori Bank (63.0%), and NH Nonghyup Bank (95.6%).