Stop Predatory Loans Using 'Proxy Payments' That Harm Teenagers

Assemblyman Lee Seong-man Proposes Partial Amendment to Interest Rate Restriction Act to Prevent Loan Sharking Among Youth

[Asia Economy Reporter Lee Kwang-ho] A bill to prevent small high-interest loans targeting teenagers has been proposed in the National Assembly.

On the 24th, according to the National Assembly Legislative Information System, Lee Seong-man, a member of the Democratic Party of Korea, proposed the "Partial Amendment to the Interest Rate Restriction Act" to prevent excessive interest on small loans.

The main point of the bill is to apply the highest interest rate cap (currently 24%) exception only when the total amount of principal and interest is less than 100,000 won. In other words, if the sum of principal and interest exceeds 100,000 won, the highest interest rate of 24% will apply.

Rep. Lee focused on the fact that small loans flourishing on social networking services (SNS) are in a legal blind spot.

'Daelip (proxy deposit)', which is causing numerous cases of harm among teenagers, is a high-interest loan business conducted on SNS targeting teenagers who need small amounts of money. They exploited the fact that the legal maximum interest rate does not apply if the loan principal is less than 100,000 won, luring teenagers who find it difficult to get loans from banks.

Additional fees they charge on top of the principal, such as 'jigakbi (late fees)' and 'sugobi (service fees)', effectively correspond to high interest rates. For example, charging a 30% service fee for one week translates to an annual interest rate exceeding 1500%.

Rep. Lee said, "Many cases involve borrowers who initially borrowed small amounts without cumbersome procedures but cannot handle the snowballing late fees," adding, "Through this amendment, we can proactively block high-interest small loans mainly targeting teenagers." He also emphasized, "Parents should regularly check their children's debt status at home, and schools should provide economic and financial education that students can relate to."

Meanwhile, besides Rep. Lee, representatives Lee Su-jin, Kang Hoon-sik, Song Ok-ju, Lee Gyu-min, Kwon In-sook, Heo Jong-sik, Shin Jeong-hoon, Shin Dong-geun, Hwang Un-ha, Kim Gyo-heung, Yoo Dong-su, Lee Hak-young, and Park Sung-jun participated as co-sponsors of this bill.