Lee Says Illegal Loans Exceeding Legal Rate Are Void, Borrowers Need Not Repay

President Lee Jae-myung said loan contracts that exceed the legal interest-rate cap are invalid, signaling a tougher response to harm caused by illegal private lenders. The message was widely seen as encouraging victims to report abuses.
 
Lee wrote on X, formerly known as Twitter, on Saturday after sharing a post by Financial Services Commission Chairman Lee Eok-won: “Illegal loans that exceed the legal limit do not have to be repaid.”
 
In his post dated April 28, the FSC chairman said a revised enforcement decree to the Loan Business Act had passed a Cabinet meeting and stressed that any loan contract carrying an annual rate above 60% makes both principal and interest void.
 
The revised decree focuses on lowering barriers for victims to file complaints. It spells out reporting forms in greater detail to make them easier to complete.
 
It also allows the Credit Counseling and Recovery Service, which runs the Inclusive Support Center for 서민금융, to ask the Ministry of Science and ICT to suspend use of phone numbers used for illegal debt collection or loan advertising.
 
The government previously revised the enforcement decree in July last year to establish grounds to void ultra-high-interest illegal loan contracts. Under that revision, contracts deemed clearly unfavorable to borrowers because they involved sexual exploitation, human trafficking, or violence and threats, as well as contracts with annual rates above 60%, can be voided in full for both principal and interest.
 
Financial authorities said the latest revision should make it easier for victims to report illegal private lending and enable faster blocking of contact methods used for unlawful collection. The government says it will strengthen its response to illegal financial practices that harm the public, including ultra-high-interest loans and coercive debt collection.