"Detailed Explanation of Rejection Reasons" Enhancing the Effectiveness of Interest Rate Reduction Requests

[Asia Economy Reporter Bu Aeri] Financial authorities announced on the 9th that they will enhance the effectiveness of the interest rate reduction request system.

The Financial Services Commission and the Financial Supervisory Service plan to improve the system by strengthening consumer guidance on the right to request an interest rate reduction and specifying notifications regarding the results of interest rate reduction requests. The interest rate reduction disclosure system will also be improved.

The right to request an interest rate reduction allows borrowers whose credit status has improved since taking out a loan to request a lower loan interest rate from financial institutions.

First, for borrowers with improved credit scores, in addition to the existing regular notifications, proactive additional guidance will be provided at least once every six months. Guidance on the application requirements for interest rate reduction requests will also be strengthened. The Financial Services Commission explained, "The acceptance rate may increase as more borrowers, who have a high likelihood of having their interest rate reduction requests accepted but were unaware and thus did not apply, submit their requests."

Notifications regarding reasons for rejection of requests will also be made more specific. Currently, reasons for rejection are provided when an interest rate reduction request is denied, but consumers find it difficult to understand the details.

Accordingly, financial authorities will subdivide the reason "minor credit improvement" and provide detailed explanations. If consumers wish, they will also be provided with the information used in the credit evaluation.

Additionally, the scope of disclosed information on interest rate reduction performance will be expanded. Acceptance rates, interest reduction amounts, non-face-to-face application rates, and average interest rate reduction amounts will be disclosed separately for household loans and corporate loans by detailed categories. Furthermore, duplicate applications will be excluded from the number of applications when calculating acceptance rates.

The banking sector will reflect these changes starting from the second half of 2022 disclosures announced at the end of this month, and other financial sectors will apply them from the first half of 2023 disclosures.

The Financial Services Commission stated, "Measures such as revising enforcement rules to enhance the effectiveness of the interest rate reduction request system will be implemented sequentially during the first half of this year according to the promotion plan."