SEOUL, Feb. 12 (Yonhap) -- The financial regulator said Tuesday it will limit the penalty interest rate as it seeks to alleviate the financial burden of desperate borrowers.
Starting June 25, the penalty interest rate will be set at up to 3 percent per annum, the Financial Services Commission (FSC) said in a statement.
Currently, no limit on the penalty interest rate is set because money lenders are required to charge the maximum legal lending rate of 24 percent per annum, according to the FSC.
However, there is the need to limit the penalty interest rate as some money lenders sell mortgage loans with a lending rate of some 10 percent, the FSC said.
In February last year, the government lowered the maximum legal lending rate from 27.9 percent to 24 percent.
The government plans to gradually cut the maximum interest rate that private lenders can charge to 20 percent per annum, FSC officials said.
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