Crack down on illegal lenders without weakening finance

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Crack down on illegal lenders without weakening finance

Published: 05 May. 2026, 00:00

Audio report: written by reporters, read by AI

Lee Eog-weon, chairman of the Financial Services Commission, inspects a poster on preventing illegal private lending during a visit to the Central Integrated Support Center for Microfinance in Jung District, Seoul, on Oct. 23, 2025. [YONHAP]

Recent remarks by President Lee Jae Myung have renewed debate over how far the government should go in protecting borrowers from illegal private lending. In a post on X, formerly Twitter, Lee said borrowers need not repay illegal loans exceeding the legal ceiling. He was reinforcing a message after Financial Services Commission Chairman Lee Eog-weon shared on social media a revised enforcement decree to the Loan Business Act aimed at strengthening protections against illegal lending.

Kim Yong-beom, chief of policy at the presidential office, also posted for three straight days, asking why Korean finance is “so cruel” and describing credit ratings as “invisible badges of class.” The remarks reflect the administration’s determination to root out illegal lenders and ease financial polarization. But good intentions can raise concerns if they risk shaking basic principles of finance.

Credit is a core tool for pricing risk and allocating resources. If credit ratings are framed as class labels and credit discipline is weakened, institutions will face confusion over risk management. Warning signs are already visible in delinquency rates and nonperforming loans across the financial sector. Protecting vulnerable borrowers is necessary, but it must not undermine financial system stability.

Korea already has multiple safeguards for vulnerable borrowers. The legal maximum interest rate, once above 60 percent a year, has been lowered to 20 percent since 2021. The government is also carrying out selective and conditional debt adjustment programs. Through the disposal of bad loans overdue for more than seven years and principal reductions, more than 1 million people are being helped to make a fresh start. A debt adjustment program worth up to 20 trillion won ($13.6 billion) is also underway for small business owners. These measures are part of inclusive finance for vulnerable groups. Policy loans such as Sunshine Loans also provide more than 10 trillion won annually to borrowers with medium and low credit ratings.

Predatory illegal lending, such as the 4,149 percent annual interest case cited by Lee Eog-weon, should be punished firmly with the full force of state authority. Relief procedures for victims should also be made faster and more proactive.

But the process must not create moral hazards or unfairly disadvantage borrowers who repay faithfully. Interest is the price of credit. If responsible borrowers are not respected, trust in the financial system will weaken. It is the government’s role to build a tighter system so vulnerable people are not pushed toward illegal lenders. Inclusive finance is possible only on a sound financial foundation.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.