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Tough policy causes more money lenders to shut down

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(Globalpost/GlobalPost)

SEOUL, Aug. 8 (Yonhap) -- More money lenders in South Korea are closing down their businesses as the country's regulator has imposed a stiffer policy on the industry, data showed Thursday.

The number of money lenders registered with the regulatory office here stood at 9,910 at the end of July, down 9 percent from 10,895 tallied as of end-December last year, according to the Consumer Loan Finance Association.

This is the first time the number of money lenders in business has dropped below the 10,000 mark since the industry advocate group started compiling related data in 2006, it said.

Given that the number of registered money lenders had grown to as many as 18,197 by the end of 2007, the size of the industry has shrunk in half in the last five years, the association said.

The decline in money lenders is largely attributable to the worsening business conditions stemming from stiffer regulatory policies.

The financial regulator pushed for a cut in their upper limit of interest rate in recent years, with the rate now reduced to 39 percent from 44 percent after the parliament passed the revised bill in June 2011.

The regulator has taken such efforts even further to curb their higher interest costs in line with President Park Geun-hye's policy focus on supporting the financially underprivileged.

The National Assembly has put up another bill for a vote, which further cuts the interest rate ceiling down to 20 percent.

An official from the Consumer Loan Finance Association said the association expects more shutdowns to take place in the short term.

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