A debtor in Korea now has the right to demand lenders to lower the interest rates if his or her credit has improved through changes in income.

The Financial Services Commission and Financial Supervisory Service announced that a revised act went into effect Wednesday enabling borrowers to request cut in lending rates upon improvement in credit status due to changes in employment, promotion or asset gains. Lending institutions are required to determine whether to accept or refuse the request within 10 days after a review, and notify the result to the applicant.

An employee of a financial institution neglecting to inform the right to a customer when they sign a loan contract would be subject to a fine up to 10 million won ($8,454).

The rule has been in place but lacked binding force that led to many cases where lenders intentionally held the information from their customers. With the strengthened regulation, the nation’s financial authorities expect more people with renewed credit rating would be able to reduce their borrowing costs.

The financial authorities estimated that about 171,000 applications for a borrowing rate cut were approved last year, which resulted in a saving of total 470 billion won.

By Kim Dong-eun and Choi Mira

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