Emphasizing the Legal Amendment
That Completely Invalidates Illegal Loan Contracts
President Lee Jaemyung has pledged to prevent contracts with illegal loan companies from becoming shackles that tighten the lives of ordinary citizens.
On the 27th, President Lee posted this message on his X account (X, formerly Twitter).
President Lee wrote about the revised Enforcement Decree of the “Act on Registration of Loan Businesses and Protection of Financial Users,” which went into effect on the 22nd, stating, “Any annual interest rate of 60% or higher will render both the interest and principal completely invalid (if it exceeds 20%, only the excess interest is invalid).” He also emphasized, “We will prevent ‘money borrowed to survive’ from becoming ‘shackles that tighten lives.’”
Since the beginning of his term, President Lee has emphasized “revitalizing the people’s economy,” and it appears he is directly communicating policy via social media to prevent harm to ordinary citizens. This amendment was approved at the Cabinet meeting on the 15th.
According to the amendment, if a loan contract is concluded under significantly disadvantageous conditions for the debtor through means such as sexual exploitation, human trafficking, violence, or threats, or if it is an illegal loan contract with an annual interest rate exceeding 60%, both the principal and interest are rendered completely invalid.
Previously, for loan contracts exceeding the legal maximum interest rate of 20%, only the portion of interest above the legal limit could be invalidated. Now, in the case of so-called “antisocial” illegal loan contracts, there is a legal basis to prevent even the recovery of the principal.
In addition, even if a contract does not fall under the category of antisocial loan contracts, unregistered illegal private lenders will not be able to collect interest. The requirements for registration of loan businesses and loan brokerage businesses have also been strengthened.
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