Both He and No are ‘easing the loan burden’… The main pledges in the general election in the financial sector are:

Both the ruling and opposition parties are adjusting the early repayment fee… Strengthening ISA tax-free benefits
Revival of national power’s ‘renewable savings’ vs. introduction of democratic ‘nationwide living expenses account’

As the official election campaign for the April 10 general election has begun, the ruling and opposition parties are trying to grab last-minute votes with financial pledges aimed at easing the loan burden of the common people.

According to the ruling and opposition party’s general election policy pledges on the 30th, the ruling party, the People Power Party, and the main opposition Democratic Party of Korea made a pledge to protect the people’s livelihood by lowering the burden of people’s loan interest rates.

The ruling and opposition parties are collectively promising to improve the early repayment fee system. The early repayment fee is a penalty-like fee imposed on the customer when repaying a loan early.

Banks manage customer deposits as loans to other customers and pay deposit interest using the loan interest earned. If early repayment occurs, such fund management is disrupted, and loan-related costs are incurred in addition to interest loss costs incurred during early repayment. Additionally, they are being charged an early repayment fee.

The amount that banks earn from prepayment fees is about 300 billion won per year, but it has been criticized for not reflecting the actual costs of financial companies and being levied uniformly without reasonable standards.

In relation to this, the People Power Party announced that it will ensure that only essential costs actually incurred are reflected in the early repayment fee, and that adding other items will be prohibited as an unfair business practice. We also promised comparative disclosure of the status and calculation standards of early repayment fees.

The People Power Party announced that it will continue to expand the scope of loans eligible for the refinancing loan service and will also pursue measures to extend the service usage time. Instead of directly lowering loan interest rates, the plan is to support people to easily switch to loans with lower interest rates by expanding refinancing loans and easing the burden of early repayment fees.

The Democratic Party also promised to ease the burden of early repayment fees. The plan is to preemptively exempt early repayment fees from policy mortgage products and policy financial institutions. A pledge was also included to directly reduce the interest burden on borrowers by excluding education taxes and fund contribution fees when calculating additional interest rates.

The Democratic Party also promised to require periodic notification of the right to request interest rate cuts. This means that banks are required to check whether the credit status of borrowers has improved at least once a half year and provide relevant information to borrowers who are likely to receive an interest rate cut.

The ruling and opposition parties also made common pledges to protect vulnerable groups from illegal private financing.

The People Power Party promised to invalidate loan contracts for anti-social illegal debt collection against vulnerable groups, provide government support in lawsuits for this purpose, and expand and reorganize the organization to support victims of illegal debt collection.

The Democratic Party announced that it would invalidate all interest contracts for contracts exceeding the legal maximum interest rate and more than double the reward for reporting illegal loan sharking, which is currently less than 20 million won.

Regarding vulnerable borrowers, the People Power Party pledged to expand loans to those with low and medium credit and increase the loan limit for faithful repayers of policy microfinance, while the Democratic Party pledged to establish a debtor-centered protection system.

The People Power Party announced that the target for credit loans to people with medium and low credit by internet-only banks mainly used by ordinary people and small business owners will be 30% or more in the ‘average balance’, and that credit loans for individual business owners will also be included in the target and managed. The plan is to gradually expand the proportion of loans to middle- and low-credit borrowers not only in internet-only banks but also in the banking sector as a whole.

We promised that for borrowers who faithfully repaid policy microfinance products such as the Sunshine Loan, the loan limit for policy microfinance products would be the same as the limit for new borrowers.

The Democratic Party made a pledge to eliminate the blind spot of vulnerable debtors who have the will to repay but have low income, making it difficult to adjust their debts, through special reduction and exemption systems and expanded application of repayment deferral systems. The pledge also included the establishment of an additional rehabilitation court to support the speedy processing of personal rehabilitation and bankruptcy, and expansion of the scope of debtor representatives other than lawyers for debtors under 30 million won.

The Democratic Party also promised to introduce a ‘national living expenses account’. All banks are allowed to open one living expenses account per depositor, and seizure of amounts deposited in the account below the minimum living expenses is prohibited.

Regarding the formation of national assets, the People Power Party made a pledge to reintroduce ‘renewable savings’ to support workers’ asset formation. Refinancing savings was first introduced in 1976 and was very popular at the time as it offered an interest rate of more than 10% per annum. Although Jaehyung Savings was relaunched in 2013, it did not gain as much popularity as before as it only provided tax-exempt benefits without government subsidies.

The People Power Party plans to exempt interest income tax and revive refinancing savings, which are designed to reflect the increase during periods of interest rate increases. They promised to lower the entry threshold, such as income standards and qualification restrictions, and to diversify the payment amount of subscribers.

The People Power Party also announced an increase in the depositor protection limit of 100 million won. The depositor protection limit has been fixed at 50 million won for over 20 years, but considering that per capita GDP has increased 2.7 times during this period and the level of major overseas countries such as the United States (USD 250,000) and Japan (JPY 10 million), there is a need to raise the protection limit. will be.

The Democratic Party proposed an unlimited tax exemption for all interest, dividends, and investment income generated from Individual Asset Management Accounts (ISA) as a nationwide asset growth support program.

The target audience will be expanded so that any citizen with an income can join, and the payment limit will be raised so that 30 million won in principal can be paid every year from the time of subscription. Investment targets are planned to be expanded to include overseas stocks.

Strengthening the tax exemption benefits of ISA was also included in the People Power Party’s pledge. The People Power Party promised to increase the ISA contribution limit by 40 million won per year to a total of 200 million won, and to increase the tax-exempt limit for dividend and interest income from the current 2 million won to 5 million won. We plan to establish a new domestic investment ISA that invests in domestic stocks and domestic stock funds, and allow comprehensive financial income tax payers to join.

In addition, the People Power Party promised to abolish the financial investment income tax, which is a tax on investment income obtained from stocks, bonds, and derivatives, and the Democratic Party promised to prevent financial authorities from conducting personal sales of high-risk and high-risk products such as stock-linked securities (ELS). The pledge included the introduction of a prior approval system that requires approval after review and regulatory measures to limit investment in high-risk and difficult products through banks based on age, investment propensity, and experience.