Money Lending Rules Studied

The government and the ruling Millennium Democratic Party announced Tuesday that they will begin to draft bills next week in a bid to protect people from loan sharks.

"We are planning to announce a wide range of bills which include requiring the registration of private money lenders with city and provincial governments," said Representative Kang Un-tae after meeting with the Ministry of Finance and Economy and the Financial Supervisory Service Monday evening, although the government opposes that part of the plan.

What is agreed is that he bills will focus on interest rate limits on small loans and on the use of 'enforcers' to threaten slow repayers. "Unlawful loan collection techniques became a serious social issue, so we have submitted a list of unlawful, banned activities," said an official at the nation's financial regulatory agency.

The financial agency is also considering introduction of a standard written contract to prevent private lenders from including terms other than interest rates and repayment terms.

An official at the finance ministry said that the government is mulling over plans to limit the interest ceiling based on market rates like the yield of the benchmark three-year government bond. "We are reviewing plans to limit the interest on loans of less than 5 million won ($3,748) to some multiple of the yield on the state bonds," said the official.

But the government and the ruling party failed to narrow their difference on how to legalize these private lenders. The ruling party contends that private financing firms should be converted into certified legal entities by registering their businesses with government authorities.

The financial agency is opposed to that plan. "These private lenders are projected to reach 10,000 at maximum, but we are not sure and the figure could be bigger," said the official at the agency. "With no firm statistics, it is impossible to regulate all private lenders. They may even misuse their certifications by using them to assure people that their deeds are lawful," the official said.

by Song Sang-hoon