Strengthening Legal Measures to Eradicate Illegal High-Interest Loans

President Lee Jae-myung has expressed a strong commitment to protecting citizens from illegal lending practices.

On the 27th, President Lee posted a message on social media platform X, stating, "I will prevent money borrowed to live from becoming a shackle that restrains life."

President Lee shared an article titled “All illegal loan contracts through usury exceeding 60% interest or through threats will be nullified from next week,” published on the 15th, reaffirming his firm stance on preventing harm to citizens caused by illegal loan contracts.

He particularly emphasized that "interest rates exceeding 60% annually, including principal, will be null and void (any excess interest above 20% will be declared void)."

This is a core aspect of the revised enforcement ordinance of the 'Act on Registration of Money Lending Businesses and Protection of Financial Users,' which went into effect on the 22nd.

Groundbreaking Legal Framework for the Protection of Citizens’ Finances

The revised ordinance was approved during a cabinet meeting chaired by President Lee on the 15th.

According to the amendment, loan contracts that are unfavorable to borrowers, established through illegal means such as violence, threats, sexual exploitation, or human trafficking, as well as high-interest loans exceeding 60%, will have both principal and interest rendered null and void.

Previously, only interest exceeding the legal maximum rate of 20% could be nullified, but now legal grounds have been established to prevent the recovery of principal associated with anti-social illegal loan contracts.

Even if a contract does not fall under the category of anti-social lending, unregistered illegal moneylenders can no longer collect interest.

Moreover, even registered money lenders who fail to properly deliver contract documents or provide false information, or who impersonate credit financial institutions to enter into contracts, can have their contracts canceled at any time.

Additionally, the registration requirements for money lending and money lending brokerage businesses have been strengthened, leading to an overall tightening of regulations against illegal financial activities.

Image source: President Lee Jae-myung / News1, Capture from President Lee Jae-myung's X.