FSS tells consumers to be wary of loan sharksIt’s been more than 10 days since private lenders have been able to charge whatever interest rate they please, after a revised law extending existing caps failed to pass the National Assembly at the end of last year.
The Financial Supervisory Service on Monday warned those in urgent need of money to be careful of loan sharks.
“Due to the absence of the regulations, there is the possibility that unregistered private lenders could charge an interest rate that exceeds the previous limit,” said an FSS official.
Under the law revised in April 2014, licensed private lenders could charge a maximum interest of 34.9 percent, down from the previous 39.9 percent.
There are 8,762 registered private lenders as of June 2015, according to the FSS.
Operating an unlicensed private lending company is prohibited by law, and is punishable by a maximum five years in prison or fine of up to 50 million won.
But many unlicensed loan sharks get around the prohibition by claiming to be lending on an individual basis, rather than actually operating a lending company.
Under the earlier law, it was legal for one person to lend to another, but the maximum interest rate was capped 25 percent.
With the absence of the limitation, the FSS said private lenders can charge as much as they want, and the financial authority would be unable take any action to help consumers.
The number of illegal high-interest loans reported to the FSS grew from four in 2014 to 26 last year.
BY LEE HO-JEONG [firstname.lastname@example.org]