[Legiscope] Where Do They Go If Moneylending Is Blocked? The 'Invisible Market' of Low-Credit Loans

When regulations on moneylending businesses are strengthened, it seems as though the market will shrink. In reality, however, rather than the demand for loans disappearing altogether, only the routes change. Financial authority reports have also repeatedly pointed out that after the phased reduction of the legal maximum interest rate, low-credit borrowers pushed out of the institutional moneylending sector have moved to private financing.

Legislative attempts surrounding this structure are continuing. According to the National Assembly Bill Information System, during the 21st and 22nd National Assemblies, a total of 64 amendment bills to the 'Act on Registration of Credit Business, etc. and Protection of Financial Users' were proposed. Among these, 33 cases were discarded, and only 2 were passed. Currently, 14 cases are still pending in the National Assembly's National Policy Committee.

As a result of analyzing Legiscope data, the regulation rate of the other finance sector, which includes the moneylending business, is 16.3%, the highest level in the financial industry. This is a significantly high figure compared to the 9.5% regulation rate for banking and securities. The regulation rate for the insurance industry is merely 0.1%.

64 Attempted Amendments to the Law Enacted in 2002... Repeated Legislation

All 64 proposed bills are amendments to the 'Act on Registration of Credit Business, etc. and Protection of Financial Users'. This means that two National Assemblies have attempted to amend this law, enacted in 2002, as many as 64 times. Looking only at the 22nd National Assembly, starting with Representative Min Hyung-bae's bill in June 2024 to Representative Lee Hoon-ki's bill in January 2026, 14 amendment bills were proposed over a period of about 1 year and 7 months. The government also submitted 1 amendment bill during the same period.

Behind the repeated legislation related to the moneylending business lies the industry structure. The moneylending business is a financial market whose main customers are low-credit borrowers who have difficulty obtaining bank loans. As cases of damage from high interest rates repeatedly emerge as social issues, the necessity for regulation is constantly raised in political circles. At the same time, analysis suggests that from the political perspective, the fact that it is a policy issue with a low burden for proposing bills and a clear response from voters also has an impact.

Interest Rate Regulation, Blocking Private Financing, and Strengthening Supervision... The Three Pillars of the Pending Bills

The 14 amendment bills currently pending in the National Assembly's National Policy Committee are largely divided into three policy directions.

The first is strengthening the regulation of the legal maximum interest rate. Representative Yun Hu-duk's bill contains provisions to directly specify the legal maximum interest rate at 20% per annum in the law. This is a bill that originates from the awareness of the problem that the current maximum interest rate is set by presidential decree and is therefore outside the control range of the National Assembly.

The second is strengthening mechanisms to block illegal private financing. Representative Kim Seung-won's bill proposed a system that allows accounts used for illegal moneylending to be immediately suspended from payment, much like voice phishing accounts. Two bills proposed by Representative Yang Bu-nam include the introduction of a preliminary review system for illegal moneylending advertisements and the blocking of SNS advertisements. In fact, more than half of the pending bills present the issue of 'illegal private financing' as a core rationale in their statements of proposed reasons.

The third is resolving regulatory blind spots. Representative Chun Joon-ho's bill contains provisions to apply total asset limits even to moneylenders registered with local governments and to strengthen document retention obligations when transferring loan receivables. Representative Cho Eun-hee's bill also emphasized the need to supplement the supervision vacuum of local governments in the wake of the recent Ponzi scheme incident involving a moneylending company.

Bill Passage Rate of 3.1%... No Cases of Individual Member Bills Passing

Out of the 64 cases, the bills that actually passed the National Assembly are only 2 cases. The passage rate is around the 3.1% level. There is a commonality among the passed bills. It is that rather than individual member bills passing as they were, they were cases processed as committee alternatives by bundling multiple bills together.

In the 21st National Assembly, a committee alternative was created by integrating various amendment bills centering around Representative Kwon Myung-ho's bill, and in the 22nd National Assembly, the chairman of the National Policy Committee processed bills in the same way in December 2024. To date, there is no case where a bill proposed by an individual member has passed alone.

The Paradox of Regulation... "Who Will Take Responsibility for the Low-Credit Loan Market?"

The reason why the debate over moneylending regulations repeats is because of the dilemma of financial policy. If regulations are strengthened, damage from high interest rates can be reduced, but at the same time, the possibility of low-credit loan demand, excluded from institutional finance, moving to private financing also grows.

Ultimately, the core question of the policy debate comes down to one thing. Who will take responsibility for the market that lends money to low-credit borrowers? While the National Assembly is failing to find an answer, a portion of the low-credit loan market is already moving outside the institutional sector.

This article was written based on Legiscope, a legislative tracking engine built by News Epoch.