Interest rate ceiling to be lowered to 30 percent

The revision of a law on interest rates proposing a cut in maximum annual interest to 30 percent will likely pass the National Assembly Thursday.

The ruling Grand National Party’s Special Committee for Working Class Policy submitted the bill in October last year. The bill has been pending for six months in the Legislation and Judiciary Committee of the National Assembly due to opposition by the lending sector and the government.

Ruling party Rep. Ju Sung-young, assistant administrator of the Legislation and Judiciary Committee, told The Dong-A Ilbo Wednesday, “There is no opposition within the party and by opposition parties. The bill will be handled at the committee Thursday.”

Party floor leader Kim Moo-sung has supported the bill and plans to make the matter a priority at the extraordinary parliamentary meeting this month, making the bill`s passage likely Thursday.

According to the revision, the interest rate ceiling of 40 percent among individuals will be lowered to 30 percent and will cover transactions not only among individuals but also between individuals and financial institutions such as lending institutions and savings banks. This will nullify the maximum interest rate of 50 percent for lenders (enforcement ordinance 44 percent) based on the current law, enabling a unified regulation for interest rates.

The law`s passage means the regulations will be tightened from what the Financial Services Commission and the ruling party`s special committee agreed on. The committee gave notice of legislating the cut in the maximum interest rate to 39 percent from 44 percent Friday.

Ruling party Rep. Hong Joon-pyo, head of the party`s special committee, said, “It is absurd to say correcting wrong laws is a populist act.”

dnsp@donga.com