Party and Government: "In a Low-Interest Environment, the 24% Maximum Interest Rate Is Outdated... Preparing a Reasonable Reduction Plan"

<16il ojeon choegogeumri inhabang-an dangjeonghyeobui> Meeting on the Morning of the 16th for the Government-Party Consultation on the Maximum Interest Rate Reduction Plan

[Image source=Yonhap News]

[Asia Economy Reporter Jeon Jin-young] The Democratic Party of Korea and the government have decided to lower the current statutory maximum interest rate of 24% per annum. The statutory maximum interest rate was previously reduced from 27.9% to 24% in February 2018. A 20% statutory maximum interest rate was a campaign pledge of President Moon Jae-in.

Kim Tae-nyeon, the floor leader of the Democratic Party, said in his opening remarks at the party-government meeting on lowering the statutory maximum interest rate held at the National Assembly on the morning of the 16th, "Maintaining the maximum interest rate at 24% in the current low-interest environment is anachronistic," adding, "We will come up with a reasonable plan to reduce it at today's party-government meeting."

Kim also stated, "We will prepare measures to prevent side effects that may arise from lowering the maximum interest rate," and added, "The party and government will devise a plan to reduce the interest burden on ordinary citizens without decreasing the supply of credit loans. We will put more effort into strengthening the financial safety net for ordinary citizens and vulnerable groups."

He further added, "The Democratic Party and the government need supplementary measures to support economic recovery, such as policy-based financial support for ordinary citizens and debt adjustment support, by distinguishing between low-credit borrowers who have repayment ability and those who do not."

Han Jeong-ae, chairperson of the Democratic Party’s Policy Committee, said, "Many countries at home and abroad continue to maintain a low-interest rate trend, and economic growth rates and nominal income growth rates are gradually declining," adding, "In such economic conditions, it would be difficult for anyone to sustain economic activities while bearing high interest rates exceeding 20%."

Chairperson Han also said, "Many ordinary citizens are still burdened with high interest rates," noting, "As of June, there are over 3 million loans across all financial sectors with interest rates exceeding 20%, amounting to more than 15 trillion won."

Eun Sung-soo, chairman of the Financial Services Commission, said, "The statutory maximum interest rate has been continuously lowered since 2002 to reduce the burden on low-credit ordinary citizens," adding, "Especially in the case of the lending industry, which is widely used by low-credit ordinary citizens, the statutory maximum interest rate is uniformly applied regardless of actual repayment ability, so without lowering the maximum interest rate, it is impossible to reduce the burden."

Chairman Eun said, "Basically, instead of indiscriminately supplying high-interest loans to those who lack ability, it is the right approach to support self-sufficiency through policy-based financial services for ordinary citizens, debt adjustment, and welfare," adding, "The plan to be explained by the government today comprehensively reviews the reduction level, method, and timing to maximize the benefits and minimize the drawbacks." Meanwhile, the party and government plan to disclose specific reduction levels and application timing after the meeting.

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