Illegal Loan Business Interest Cap Reduced to 6% Annually... Maximum Fine Raised to 100 Million Won

[Asia Economy Reporter Kim Hyo-jin] The interest rate that illegal loan companies can charge will be lowered from 24% per annum to 6%, and fines for illegal lenders will be increased up to 100 million won.

The Financial Services Commission announced on the 28th that it will propose a legislative amendment to the "Act on Registration of Loan Business and Protection of Financial Consumers" containing these details.

The amendment changes the designation of 'unregistered loan providers and unregistered loan brokers,' who operate loan businesses or loan brokerage without registration, to 'illegal private financiers and illegal private finance brokers.' Currently, illegal private financiers can charge interest up to the maximum rate of 24% per annum, the same as registered loan providers, but the amendment limits the interest they can charge to 6% per annum. Practices such as 'increasing overdue interest through refinancing'?where the principal plus overdue interest is lent again?and 'loans without documentation' are invalidated.

The maximum fine for illegal loan businesses and loan brokerage, currently capped at 50 million won, has been raised to 100 million won. Fines for charging interest exceeding the statutory maximum rates (24% per annum for registered loan providers and 6% per annum for illegal private financiers) will also increase from the current maximum of 30 million won to 100 million won. Penalties for false or exaggerated advertising have been strengthened from a maximum fine of 50 million won to imprisonment of up to three years or a fine of up to 100 million won.

The amendment also requires loan collection agents to keep contracts and related documents on file and mandates that if a user requests the return of the original contract after debt repayment is completed, it must be returned.

This content was produced with the assistance of AI translation services.