Seoul Says No Interest Caps

The government said Tuesday it would take steps to stop private lenders from taking advantage of borrowers, but would not put a cap on interest rates as some have demanded as a protection for middle and low income earners.

Loan contracts with extremely high interest rates and late charges or interest that must be paid in advance will be nullified, the government said. But it added that the 25-percent legal ceiling on loan interest rates, which was rescinded in 1998, will not be restored because it could distort capital markets.

Civic groups demanded Tuesday that the government bring back the 1962 legislation that capped loan interest rates. They cited cases reported lately in which borrowers have been the victims of exorbitant loan rates of up to 360 percent per year.