Usurious Loans To Be Nullified, Seoul's Trade Body Decides

The government antitrust agency said Tuesday it will cancel loan contracts which specify usurious interest rates.

The Fair Trade Commission said that it is now reviewing contracts issued by private money lenders, focusing particularly on interest rates. Any contracts that charge interest rates in excess of 400 percent or those that require large up-front interest payments will be nullified beginning perhaps next month, the agency said.

"Borrowers can then bring civil suits to recover any payments made," an antitrust official said. The agency believes this will help curb private money lenders that charge excessive interest rates, he said.

Also beginning in May, private money lenders will be required to make detailed disclosure of the terms of loan contracts, including the interest rate charged, any initial payments required and any additional fees involved. The conditions must be specified on advertising material for such loans.

The official said it is important for borrowers to obtain and keep the written contract signed by both parties. "A contract will be required to bring a complaint with the commission, and it will also be required when the borrower decides to bring legal action to recover his money," he said.

The agency also said that lenders who try to enforce usurious terms once a contract is nullified will be reported to the prosecutors' office.

by Lee Sang-ryeul