Private Lenders’ TV Ads to Be Banned

By Kang Seung-woo

Staff Reporter

The widely recognized, personified radish in advertisements of the nation's No. 1 private moneylender Rush and Cash could soon disappear, as the government is pushing to ban loan firms from advertising on TV and in daily newspapers.

A total of 30 lawmakers, headed by Park Jun-seon of the ruling Grand National Party, presented a revised bill to the National Assembly Tuesday.

The bill says that loan companies should be only allowed to post advertisements and use bulletin boards at all times inside their office buildings.

According to the bill, they would also be allowed to advertise in weekly magazines 60 times a year, and they would also be permitted to do so in periodical publications issued more than once a year.

In addition, if loan firms choose to sponsor cultural, music or sporting events, they can only use their names in event titles, but are not permitted to advertise in any other way.

Other than these cases, promotions are forbidden.

The radical move came as private moneylenders are emerging as a social problem with many individuals falling victim to loan sharks after being lured by misleading ads.

They attract vulnerable individuals, who have been denied loans from banks due to bad credit, and charge them usurious interest rates.

More often than not, borrowers of such loans saw their interest snowball and then, it becomes impossible for them to pay back their debts.

As a result, earlier this month, the government and the GNP enforced a cap on interest rates at a maximum 39 percent from 49 percent in order to reduce the debt burden on low-income citizens.

The bill is seen as a way to ban moneylenders from going public.

Thus far, they have used cable television stations and daily newspapers to advertise.

"There are too many advertisements by private moneylenders so people are easily likely to fall victim to them," Park said.

"In addition, the unbridled advertisements are displeasing to those who watch them."

However, the loan companies reacted angrily, terming it an improper regulation.

"Private money lending is a business according to the law, but it is unreasonable that we cannot advertise," a loan firm representative said.

"If advertisements are limited, lenders will have to rely on brokers," added the Consumer Loan Finance Association (CLFA).

"But it will trigger other troubles as the agents receive fees from clients amid excessive credit inquiries."

Meanwhile, financial authorities are proceeding with caution.

"It appears that the main purpose of the bill is to lower their lending rate and reduce their advertisement fees," an official of the Financial Service Commission (FSC) said.

"However, it is limiting the freedom of business, so the bill needs to be considered thoroughly."

An official of the Financial Supervisory Service (FSS) said, "Given the damages caused by exaggerated advertisements, we are in need of measures, but rather than banning commercials, limiting their frequency is a better idea."