Legal Maximum Interest Rate Cut Again? Populism Overuse... Financial Sector on Edge

Candidate Lee Jae-myung "Legal Maximum Interest Rate 11.3~15% Appropriate"
Ruling Party Lawmakers Push for Maximum Interest Rate Reduction Bills
Populism Criticism... Concerns Over Side Effects Like Illegal Loan Market Balloon Effect

[Asia Economy Reporter Jin-ho Kim] "The statutory maximum interest rate should be between 11.3% and 15%." (May 25 · Lee Jae-myung, Democratic Party presidential candidate SNS)

Less than six months after the statutory maximum interest rate was lowered, the ruling party is accelerating legislative amendments for further reductions. In line with candidate Lee's financial policy direction, bills are being rapidly proposed, raising concerns that populist pledges are being excessively made amid the presidential election campaign.

According to the National Assembly on the 24th, 14 Democratic Party lawmakers including Min Byung-duk proposed the "Partial Amendment to the Interest Restriction Act" the day before. The bill aims to lower the maximum interest rate from the current 20% to 15%. It also unifies matters related to interest restrictions, specifying that the law applies to all contractual interest limits on monetary loans. The bill includes provisions to strengthen legal penalties if the interest rate exceeds twice the maximum rate.

Representative Min explained, "Compared to the economic situation where interest rates remain low, the current Interest Restriction Act is a burden on the economic activities of small business owners and ordinary citizens."

Fellow party member Lee Soo-jin also proposed a bill last month to reduce the rate to below 13%. Lee cited a research result from the Gyeonggi Research Institute, which showed that the maximum interest rate could be lowered to between 11.3% and 15% through cost reductions such as procurement costs. Democratic Party lawmakers Min Hyung-bae, Song Jae-ho, and Seo Young-kyo have also proposed bills to reduce the rate to below 15%.

However, the financial sector views this as a "populist pledge." There are concerns that an excessively rapid reduction of the maximum interest rate will drive ordinary citizens into illegal private loans. According to the Financial Services Commission, about 39,000 people were pushed into the illegal private loan market due to the maximum interest rate reduction in July.

There are also concerns that the bill's promotion process will be one-sided. It is expected that the ruling party, which can pass bills unilaterally, will speed up efforts to win votes ahead of the presidential election. Especially since the Gyeonggi Research Institute, which served as the basis for the ruling party lawmakers' bill proposals, acts as candidate Lee's think tank, the financial sector is taking this seriously.

A financial sector official expressed concern, saying, "Populist pledges aim to alleviate the burden on ordinary citizens on the surface, but if excessive, they can cause market distortions and lead to many side effects."

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