From July 7, the Legal Maximum Interest Rate Lowered to 20%... Financial Services Commission Announces Follow-up Measures for Side Effects

Sunshine Loan 17 Interest Rate Reduction and Temporary Supply of Debt Refinancing Products Exceeding 20%
Promotion of Lowering Maximum Brokerage Fees...Reform of Medium-Interest Loan System

[Asia Economy Reporter Kwangho Lee] Starting from July, the statutory maximum interest rate will be lowered to 20% per annum.

The Financial Services Commission announced that the revision of the Presidential Decree related to the "Act on Registration of Credit Business and Protection of Finance Users" (Credit Business Act) and the "Interest Rate Restriction Act," which lowers the statutory maximum interest rate from the current 24% to 20%, was approved at the Cabinet meeting on the 30th.

Accordingly, from July 7, the maximum interest rate applied to loans from financial companies and private transactions will be reduced by 4 percentage points from 24% to 20%.

The government plans to announce follow-up measures to maximize the interest reduction effect from the maximum interest rate cut while minimizing side effects such as reduced access to funds for low-credit borrowers and shifts to illegal private loans.

First, the policy aims to sufficiently provide policy-based financial services for low-income earners, such as lowering the interest rate on the Saessal Loan 17 and temporarily supplying refinancing products for loans exceeding 20%. Additionally, through improvements in the credit business system, such as lowering the cap on brokerage fees (currently 4% for amounts up to 5 million KRW and 3% for amounts exceeding that), the government intends to promote the supply of loans to ordinary citizens while continuing efforts to eradicate illegal private loans.

Furthermore, the system will be restructured to ensure that mid-interest rate loans are supplied mainly to middle- and low-credit groups, and the expansion of mid-interest rate loan supply by internet banks will be encouraged to attract low-credit borrowers following the maximum interest rate reduction.

A Financial Services Commission official stated, "Detailed measures will be announced sequentially between March and April, and will be promptly implemented in line with the enforcement of the maximum interest rate reduction."

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