A in her twenties borrowed 200,000 won from an illegal private finance company in the name of living expenses. It was a condition of repaying 660,000 won, more than twice the principal amount after a month. However, when Mr. A could not pay the money on the promised date, members of the company started threatening to get the money from Mr. A’s parents.
When the interest owed by Mr. A is converted into the annual interest rate, it reached 7217%. In the future, the areas in which such illegal private finance companies can operate will be narrowed. This is because interest paid to illegal private finance companies over 6% per year becomes invalid and can be returned. The government also provides free lawyers for interest return lawsuits. Under the law, Mr. A only needs to pay 201,000 won.
On the 29th, the Financial Services Commission announced at the State Council meeting that the revised bill of the’Act on the Registration of Loan Businesses and Protection of Financial Users’ was resolved. If the amendment passes through the National Assembly, the interest rate at which illegal private financiers can lend money will be reduced from 24% to 6%, and the excess interest will be refunded. For example, if you borrow 1 million won at an annual interest rate of 10% from an illegal private finance company, 4% points (10%-6%) will be invalid and may be deducted from the principal and interest.
However, an official from the Financial Services Commission explained, “Because the legal debt interest rate (commercial legal interest rate) under the commercial law is 6% per year, only the interest exceeding this was made invalid.”
Penalties for illegal private financiers are also strengthened. Loans in violation of the highest interest rate are subject to imprisonment for up to three years or fined up to 50 million won. For illegal private financing companies, the maximum interest rate is 6%. The amendment included a plan for illegal private financiers to be punished by imprisonment for up to three years if they impersonate government-supported financial products or loans to financial institutions.
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