Is Lowering the Legal Maximum Interest Rate an Effective Policy?
Recently, there has been a political move in South Korea to lower the legal maximum interest rate from 20% to 15%. Although this change aims to protect financially vulnerable groups, Recently, there has been a political move in South Korea to lower the legal maximum interest rate from 20% to 15%. Although this change aims to protect financially vulnerable groups, there is ongoing debate over its effectiveness. This article will explore the background of lowering the legal maximum interest rate, the backlash from the financial industry, and alternative proposals such as linking the rate to market interest rates and expanding policy financing. 1. Background and Current Status of the Legal Maximum Interest Rate Reduction Recently, Representative Seo Young-kyo of the Democratic Party of Korea proposed amendments to the Interest Rate Limitation Act and the Loan Business Act, which aim to lower the legal maximum interest rate to 15%. The intention behind these changes is to prevent financial...