From the 22nd of this month, lend contracts that exceed an annual interest rate of 60% will be rendered completely void. In addition, a system will be implemented to prevent lenders from collecting principal and interest on contracts where sexual exploitation or assault has occurred.
On the 15th, the government passed amendments to the lend business law enforcement decree and supervision regulations through a Cabinet meeting. A major new feature of this amendment is the "invalidity of antisocial lend contracts." Previously, it was only possible to invalidate the interest exceeding the legal maximum interest rate (20% per annum) for contracts that charged interest above that limit. However, with the change in the enforcement decree, contracts exceeding three times the maximum interest rate (60% per annum) render not only the interest but also the principal completely void. Additionally, contracts that were concluded significantly disadvantageously to debtors involving sexual exploitation, human trafficking, bodily harm, assault, or intimidation will also be classified as antisocial lend contracts, rendering the principal and interest invalid.
The government has strengthened the registration requirements for the lend industry to increase self-regulation effects and reduce consumer harm. This action follows concerns that some small lend operators have colluded with illegal moneylenders. As a result, the capital requirements for registered lend operators in local governments have been increased from 10 million won to 100 million won for individuals and from 50 million won to 300 million won for corporations. Furthermore, to strictly distinguish between illegal moneylenders and registered lend operators, the legal name of unregistered lend operators has been changed to illegal moneylenders.
In addition, the government has raised the maximum penalties for illegal moneylenders from five years in prison and a fine of 50 million won to ten years in prison and a fine of 500 million won. To eradicate illegal telemarketing practices, there are plans to create channels for anyone to report phone numbers used for illegal money lending and illegal debt collection. These systems will be implemented from the 22nd of this month.
Kim Byeong-hwan, the Financial Services Commissioner, noted, "With this system improvement, the incentive for entry into illegal money lending will be suppressed, and it will contribute to the recovery of victims." He emphasized, "With this system improvement as an opportunity, it is expected that demand for lawsuits to invalidate illegal money lending contracts will increase," and added, "We will actively support lawsuits to invalidate antisocial lend contracts in cooperation with the Financial Supervisory Service and the Korea Legal Aid Corporation."