South Korean regulator amends credit act to combat illegal lending

The maximum penalty for unlawful loan service providers has been doubled.

South Korea’s financial regulator has introduced revisions to the credit business act to combat loan sharking and illegal lending, according to a press release.

Under the revisions, the maximum annual interest rate charged by “unlawful private loan service providers” will be limited to 6%, says the Financial Services Commission (FSC). 

Meanwhile, re-issuance of loans in larger amounts with accrued interest, as well as loan contracts without authentic documentation, will be invalidated.

The maximum penalty for unlawful private loan service providers will also be raised from around $41,660 (KRW50m) to more than $83,300 (KRW100m).

False and exaggerated advertisements face up to three years of imprisonment or $83,300 (KRW100m).

More specific definitions will also be applied to private loan businesses and private loan brokerage services to prevent them from conducting online brokerage activities that attempt to bypass regulations.