Ruling Party and Government Lower Legal Maximum Interest Rate from 24% to 20%... Effective from Next Year (Comprehensive)

[Image source=Yonhap News]

[Asia Economy reporters Wondara and Jeon Jinyoung] The Democratic Party of Korea and the government have agreed to reduce the statutory maximum interest rate by 20% and to apply this reduction after the first half of next year.

On the morning of the 16th, Han Jeong-ae, Chair of the Democratic Party’s Policy Committee, told reporters after the 'Maximum Interest Rate Reduction Party-Government Meeting' held at the National Assembly, in response to the question "Will the maximum interest rate be lowered to 20%?" that "It seems that will be the case."

Yoon Kwan-seok, a Democratic Party lawmaker and chair of the National Assembly’s Political Affairs Committee, when asked about the timing of the reduction, said, "It will take some time. It takes at least six months to draft the enforcement ordinance," adding, "It will be difficult to implement this year, so it will have to be in the first or second half of next year."

Regarding the '20% reduction plan,' Chair Yoon said, "Of course, some proposed bills suggest even lower rates," and added, "Supplementary measures must be prepared on a parallel track." When asked about the specifics of these supplementary measures, he said, "If policy finance and measures for low-credit borrowers are strengthened, it could reduce the shift to illegal private loans."

Meanwhile, this reduction in the statutory maximum interest rate is the first in three years since 2018. At that time, the statutory maximum interest rate was lowered from 27.9% to 24% on February 2018. The 20% statutory maximum interest rate was also a campaign pledge of President Moon Jae-in.

Kim Tae-nyeon, the Democratic Party floor leader, said in his opening remarks at the party-government meeting, "Maintaining the maximum interest rate at 24% in the current low-interest-rate environment is anachronistic," and added, "We will come up with a reasonable reduction plan at today’s party-government meeting."

Eun Sung-soo, Chairman of the Financial Services Commission, also said, "The statutory maximum interest rate has been continuously lowered since 2002 to reduce the burden on low-credit citizens," and added, "Especially in the case of loan businesses frequently used by low-credit 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 their burden."

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