INTEREST LIMITATION ACT
Act No. 8322, Mar. 29, 2007
Amended by Act No. 9344, Jan. 21, 2009
Act No. 10925, Jul. 25, 2011
Act No. 12227, Jan. 14, 2014
The purpose of this Act is to contribute a stable economic environment for the public and to realize economic justice by prescribing appropriate limits to interest rate.
| Article 2 (Limits to Interest Rate) |
| (1) | The maximum interest rate under a loan contract shall be prescribed by Presidential Decree to the extent not exceeding 25 percent per annum. <Amended by Act No. 10925, Jul. 25, 2011; Act No. 12227, Jan. 14, 2014> |
| (2) | The maximum interest rate under paragraph (1) means the interest rate under the relevant agreement. |
| (3) | Any amount exceeding the maximum interest rate under paragraph (1) as the interest rate under the contract shall be void. |
| (4) | If a debtor has arbitrarily paid interest exceeding the maximum interest rate, the amount overpaid shall be counted as principal and the debtor may request a refund therefor, if no principal remains outstanding. |
| (5) | Paragraph (1) shall not apply to interest on a loan, the principal of which is less than 100,000 won. |
| Article 3 (Pre-Deduction of Interest) |
Where pre-paid interest is deducted in advance, and the amount deducted exceeds the amount calculated by applying the maximum interest rate determined under Article 2 (1) based on the amount a debtor actually receives as the principal, the excess amount shall be deemed to have applied toward the principal.
| Article 4 (Deemed Interest) |
| (1) | The amount a creditor receives in connection with a loan, no matter how the items are referred to, such as a deposit, rebate, fees, deduction, or advance interests, shall be deemed interest. <Amended by Act No. 10925, Jul. 25, 2011> |
| (2) | Where a debtor agrees to bear a duty to pay money in connection with a loan, such payment shall be deemed interest if the duty is supposed to be borne by a creditor in nature, in light of causes of the occurrence of the duty, relevant statutes, of details of the duty, common principles of deals, etc. <Newly Inserted by Act No. 10925, Jul. 25, 2011> |
| Article 5 (Restriction on Agreement on Compound Interest) |
Any agreement on compound interest stipulating that interest shall be paid again on such interest shall be void with respect to any amount equivalent to the portion exceeding the maximum interest rate under Article 2 (1).
| Article 6 (Reduction on Compensation) |
If a court determines that the compensation set by a party with respect to failure to repay debts for a monetary purpose, the court may reduce the compensation to a reasonable extent.
| Article 7 (Scope of Application) |
| Article 8 (Penalty Provisions) |
| (1) | A person who has received interest in excess of the maximum interest rate prescribed in Article 2 (1) shall be punished by imprisonment with labor not exceeding one year or by a fine not exceeding 10 million won. |
| (2) | The punishment of imprisonment with labor and the fine under paragraph (1) may be imposed concurrently. |
[This Article Newly Inserted by Act No. 10925, Jul. 25, 2011]
ADDENDA
| (1) | (Enforcement Date) This Act shall enter into force three months after the date of its promulgation. |
| (2) | (Transitional Measure) With respect to interest rates under loan contracts concluded before this Act enters into force, the interest rates shall be calculated in accordance with this Act after this Act enters into force. |
ADDENDA <Act No. 9344, Jan. 21, 2009>
Article 1 (Enforcement Date)
This Act shall enter into force three months after the date of its promulgation. (Proviso Omitted.)
Article 2 through 9 Omitted.
ADDENDA <Act No. 10925, Jul, 25, 2011>
| (1) | (Enforcement Date) This Act shall enter into force three months after the date of its promulgation. |
| (2) | (Applicability) The interest rates calculated in accordance with this Act on and After this Act enters into force shall govern the application of interest rates for contracts on loans concluded before this Act enters into force. |
ADDENDA <Act No. 12227, Jan. 14, 2014>
Article 1 (Enforcement Date)
This Act shall enter into force six months after the date of its promulgation.
Article 2 (Applicability)
The amended provisions of Article 2 (1) shall apply starting with the first contract entered into or renewed after this Act enters into force.