Financial Authorities Introduce New Guidelines for Advertising Deposit Products
In a bid to improve transparency and protect consumers, financial authorities have announced new guidelines for advertising interest rates on deposit-type products.
Displaying Maximum and Base Interest Rates
Under the new guidelines, financial institutions will be required to prominently display both the maximum and base interest rates when advertising special deposits and savings. This will ensure that potential customers have a clear understanding of the interest rates they can expect.
Past practices of focusing solely on the highest interest rates in advertisements have been deemed misleading by authorities. By writing the highest interest rate in large letters at the top of the ad, while relegating the lowest interest rate to small letters at the bottom or on a less prominent web page, customers may have been unaware of the strict conditions required to qualify for the highest rate. As a result, they risked signing contracts without fully realizing that only the base interest rate would apply.
From now on, sellers of financial products must present the maximum interest rate alongside the base interest rate. Moreover, the display of these rates must be balanced in terms of advertising position, font size, thickness, and color, making it easier for users to identify the range of interest rates.
Clarifying Favorable Interest Rate Conditions
Financial authorities have also stressed the importance of clearly explaining the conditions for favorable interest rates. They have observed that some sellers of financial products have neglected to include these conditions in their advertisements or product descriptions, instead referring customers to their websites. To ensure greater transparency, the guidelines now require sellers to include these conditions in both their descriptions and advertisements.
Additionally, when favorable interest rates are offered through events such as lotteries, banks must provide information regarding the probability of winning. This is because some banks have used lottery events to distribute favorable interest rates but have failed to disclose the probability of customers being eligible for these rates, making it difficult for consumers to make informed decisions.
Moving forward, any new forms of preferential interest rates must also be accompanied by information that enables consumers to make reasonable judgments about payment conditions.
Providing Clear Information on Interest at Maturity
Another aspect of the guidelines calls for sellers of financial products to provide sufficient information about the interest customers can expect to receive at maturity. Currently, many deposit products only list contract interest rates and formulas, which can be confusing for individuals with limited financial knowledge. By specifying details such as the amount of payment, contract period, and applied interest rate, consumers will be better equipped to calculate their expected interest amounts.
The Financial Services Commission has stated that these improvements will be rolled out voluntarily by banks, savings banks, credit unions, and other financial institutions. Any necessary adjustments will be made based on feedback and consultation with the industry. The goal is to enhance transparency, protect consumers, and ensure a fair financial marketplace.
For more information, please contact:
- Financial Services Commission Financial Consumer Policy Division at 02-2100-2524
- Financial Supervisory Service Product and Sales Review Office at 02-3145-8223
- Korea Bank Federation Self-Regulatory Department at 02-3705-5012
- Korea Federation of Savings Banks Consumer Protection Department at 02-397-8682
- Korea Federation of Credit Unions, Financial Consumer Protection Center at 042-720-1463
In future, when advertising special deposits and savings, the basic interest rate should be displayed together with the maximum interest rate.
In addition, financial users must be made clear about the interest they will receive when they mature.
On the 14th, the Financial Services Commission and the Financial Supervisory Service provided guidance on compliance requirements when advertising interest rates on deposit-type products.
This is a subsequent measure following the guidance for financial consumers in April, and was prepared through on-site inspections of some banks and consultations with the banking industry and savings banks.
Bank window in Seoul. (Photo = Policy Reporters)
According to financial authorities, some of the financial products that offer high favorable interest rates, such as special deposit products, are advertised by overemphasizing only the highest interest rates.
Only the highest interest rate is written in large letters at the top of the ad, and the lowest interest rate is written in small letters at the bottom of the ad or on the associated web page, where customers focus less.
In this case, if financial users do not meet the strict preferential interest rate conditions, there is a risk of signing a product contract without clearly recognizing that only the base interest rate is used.
Accordingly, in the future, when advertising deposit-type products, sellers of financial products must also indicate the base interest rate when advertising the maximum interest rate.
To ensure that users can easily identify the range of interest rates, the maximum interest rate and the base interest rate must be displayed in a balanced manner in terms of advertising position, font size, thickness and colour.
Plan to improve the display of base interest rates and favorable interest rate payment conditions when advertising deposit products. (Data = Financial Services Commission)
Financial authorities must also explain the terms of favorable interest rates not only in descriptions of financial products but also in advertisements.
This is because some financial product sellers, instead of listing favorable interest rate payment conditions in advertisements or descriptions of deposit products, state ‘posted on the website, etc.’, making it difficult for consumers to understand all right.
When favorable interest rates are applied in a new form, such as a lottery, it is also mandatory to provide information such as the probability of winning.
This is because some banks pay favorable interest rates through lottery events when designing special deposits, but only provide information such as ’10 accounts withdrawn each time’, making it difficult to reasonably estimate the probability of applying favorable interest rates .
In the future, when preferential interest rates are applied not only by lottery but also in a new form different from the current one, information must be provided at a level that allows consumers to make a reasonable judgment about payment conditions .
In addition, when advertising financial products, sufficient relevant information will be provided so that consumers can easily understand the interest received at maturity.
Currently, deposit products only list contract interest rates and interest formulas through product descriptions etc., so users who lack financial understanding may find it difficult to calculate the interest received at maturity .
In particular, the Financial Services Commission explains that in the case of savings accounts, etc., the interest rate compared to the final principal amount paid varies depending on the amount of the monthly payment, so it is necessary to reduce the possibility of consumer misunderstanding.
Accordingly, in the future, sellers of financial products must provide sufficient information about the interest received according to the structure of the product, such as the amount of the payment, the period of the contract, and the applied interest rate.
The Financial Services Commission explained that this improvement plan will be implemented autonomously first in the advertising of deposit products through a preparation process by banks, savings banks, credit unions, etc., and then any necessary issues will be reflected in the review of the ‘Financial’ report in the future. Advertising Regulation Guidelines’ through industry consultation.
Inquiries: Financial Services Commission Financial Consumer Policy Division (02-2100-2524), Financial Supervisory Service Product and Sales Review Office (02-3145-8223), Korea Bank Federation Self-Regulatory Department (02-3705 -5012 ), Korea Federation of Savings Banks Consumer Protection Department (02-397-8682), Korea Federation of Credit Unions, Financial Consumer Protection Center (042-720-1463)
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