From Tomorrow, Legal Maximum Interest Rate Reduced to 20%... Ministry of Justice and Others Urge "Immediate Reporting of Any Damage"

[Asia Economy Reporter Kim Hyung-min] The Ministry of Justice, the Financial Services Commission, and the Financial Supervisory Service will step in to assist loan users who may experience confusion following the reduction of the statutory maximum interest rate to 20% starting tomorrow (the 7th).

On the 6th, the Ministry of Justice and others issued a press release to inform loan users of important precautions. This is to ensure that loan users do not suffer disadvantages due to the statutory maximum interest rate reduction effective from the 7th.

To alleviate the burden on high-interest loan borrowers, from the 7th, the maximum interest rate applied to lenders under the Loan Business Act and credit finance institutions will be lowered from 24% per annum to 20%. Additionally, the maximum interest rate applied to private money transactions of 100,000 KRW or more under the Interest Limitation Act will also be reduced from 24% to 20% per annum.

Although the maximum interest rate reduction typically does not apply retroactively to existing loans, this time savings banks, capital companies, and card companies have agreed to voluntarily apply the reduction to existing loans as well.

Accordingly, the Ministry of Justice explained that borrowers using these lending institutions should inquire with their financial companies about the retroactive application of the reduced interest rate and confirm it.

Furthermore, even if a company has not voluntarily reduced rates, borrowers can inquire whether interest rate reductions are possible through contract renewals or other means with the relevant financial institutions.

For new loans, renewals, or extensions, the interest rate must be set at 20% per annum or lower. If damages occur due to exceeding this rate, reports should be made to the Illegal Private Loan Reporting Center and others. The government is operating a joint crackdown period on illegal private loans across ministries until October. Lending institutions or operators charging interest exceeding the statutory maximum interest rate face imprisonment of up to three years or fines up to 30 million KRW.

Borrowers can claim the return of any excess amount charged beyond the maximum interest rate, and if legal assistance is needed, they can apply for the government's "Free Support Program for Debtor Representatives and Litigation Lawyers."

Additionally, the Ministry of Justice and others urged that if extending existing loans or obtaining new loans is difficult, borrowers should avoid illegal private loans and use the Korea Inclusive Finance Agency. They added that the Korea Inclusive Finance Agency supplies various policy-based financial products for low-income individuals. The agency also announced that it has established a customized counseling system to support low-credit borrowers in overcoming difficulties arising from the maximum interest rate reduction.

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