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SEOUL, May 22 (Yonhap) -- The country's financial regulator has expressed a negative view on a parliamentary move to stiffen rules for private money lenders, which could further stifle those who are denied access to loans by banks and other institutions due to low credit, sources said Wednesday.
Under the bill pushed by the parliament, a money lender is required to have an net asset worth 100 million won (US$89,903) or above. Those with assets worth more than 1 billion won will be included in the Financial Supervisory Service's inspection list.
The parliament's move came amid growing calls for stiffer rules on private money lenders that are often considered to extort money from debtors with low credit with a jaw-dropping annual interest rate of up to 39 percent.
The Financial Services Commission (FSC) said nine out of 10 registered money lenders operating in South Korea have net assets of such an amount, arguing that 92 percent of them will be forced to close their businesses if the new rules are imposed.
The top regulator noted that the revised bill will only work in favor for larger players, which can result in taking away the last resort from those with bad credit but who still need to borrow money to get by.
The FSC predicted that the bill will disqualify 10,779 out of 11,702 registered money lenders causing them to shut down their businesses.
Money lenders in South Korea have recently suffered a downturn due to such toughened regulations amid a slowing economy.
The number of money lenders sharply fell to 11,702 as of end-June last year from 15,380 two years earlier. Only about 430, or 3.7 percent, have more than 300 million won in net assets, according to the FSC.
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