South Korea’s divisive parliament is in rare agreement that something has to be done to stop loan sharks from preying on a million desperate borrowers.
The global economic crisis has been a boon for private lending firms that operate outside the banking system. By law they can charge 49 percent interest per annum but many demand far more.
Members of parliament have proposed laws that would cut the interest rates private lenders can charge and push the criminal segment out of the sector.
Most money is lent by a few firms, operating within the law and advertising fast cash on TV.
But there are thousands of small lenders operating on the fringes of the law that target people desperate for money.
The latest worries come as household debt is rising in South Korea, hitting 661.51 trillion won (US$536.2 billion) at the end of June, equal to 65 percent of GDP.
“Households are spending more than they earn and their ability to pay off debt is weak. If interest rates rise and debt grows, this will pose problems for the economy,” said Jeong Young-sik at Samsung Economic Research Institute.
The amount owed to private lenders is relatively small, but lawmakers are worried about the wider social costs. Only about 5 percent of South Koreans use private lenders.
But the government financial regulator, the Financial Services Commission (FSC), said they account for about 85 percent of the country’s troubled debtors who are seriously behind in payments or on the brink of bankruptcy.
The typical loan made by the some 16,000 private lenders is for a few thousand dollars for household expenses or to start up a small business, the commission said.
The FSC launched its own crackdown in April and said it would start a 3 trillion won fund to provide low-interest loans for people who would typically borrow from private lenders.
It forced about 1,000 lenders out of business.
Laws before parliament would lower the ceiling for rates to about 30 percent for non-secured loans and increase fines and punishments for those caught violating the law.
Earlier this year, South Korean media was saturated with the story of a young women who borrowed about US$2,500 to pay college tuition and was slapped with illegal fees that put her interest rate at nearly 350 percent, forcing her to take out another loan.
The lender then forced the woman into prostitution to pay off her debt. Her father was dragged into the mess and also fell into debt. He ended up killing his daughter and committing suicide.
DIALOGUE: US president-elect Donald Trump on his Truth Social platform confirmed that he had spoken with Xi, saying ‘the call was a very good one’ for the US and China US president-elect Donald Trump and Chinese President Xi Jinping (習近平) discussed Taiwan, trade, fentanyl and TikTok in a phone call on Friday, just days before Trump heads back to the White House with vows to impose tariffs and other measures on the US’ biggest rival. Despite that, Xi congratulated Trump on his second term and pushed for improved ties, the Chinese Ministry of Foreign Affairs said. The call came the same day that the US Supreme Court backed a law banning TikTok unless it is sold by its China-based parent company. “We both attach great importance to interaction, hope for
‘GREAT OPPRTUNITY’: The Paraguayan president made the remarks following Donald Trump’s tapping of several figures with deep Latin America expertise for his Cabinet Paraguay President Santiago Pena called US president-elect Donald Trump’s incoming foreign policy team a “dream come true” as his nation stands to become more relevant in the next US administration. “It’s a great opportunity for us to advance very, very fast in the bilateral agenda on trade, security, rule of law and make Paraguay a much closer ally” to the US, Pena said in an interview in Washington ahead of Trump’s inauguration today. “One of the biggest challenges for Paraguay was that image of an island surrounded by land, a country that was isolated and not many people know about it,”
‘FIGHT TO THE END’: Attacking a court is ‘unprecedented’ in South Korea and those involved would likely face jail time, a South Korean political pundit said Supporters of impeached South Korean President Yoon Suk-yeol yesterday stormed a Seoul court after a judge extended the impeached leader’s detention over his ill-fated attempt to impose martial law. Tens of thousands of people had gathered outside the Seoul Western District Court on Saturday in a show of support for Yoon, who became South Korea’s first sitting head of state to be arrested in a dawn raid last week. After the court extended his detention on Saturday, the president’s supporters smashed windows and doors as they rushed inside the building. Hundreds of police officers charged into the court, arresting dozens and denouncing an
CYBERSCAM: Anne, an interior decorator with mental health problems, spent a year and a half believing she was communicating with Brad Pitt and lost US$855,259 A French woman who revealed on TV how she had lost her life savings to scammers posing as Brad Pitt has faced a wave of online harassment and mockery, leading the interview to be withdrawn on Tuesday. The woman, named as Anne, told the Seven to Eight program on the TF1 channel how she had believed she was in a romantic relationship with the Hollywood star, leading her to divorce her husband and transfer 830,000 euros (US$855,259). The scammers used fake social media and WhatsApp accounts, as well as artificial intelligence image-creating technology to send Anne selfies and other messages
RSS