[Asia Economy Reporter Kim Hyo-jin] From immediately after the Lunar New Year holiday, applications for debtor representation and other support related to illegal debt collection damages can be submitted to the Financial Supervisory Service and the Korea Legal Aid Corporation.
According to financial authorities on the 26th, these institutions will begin accepting applications for debtor representatives and litigation lawyer support starting on the 28th. The Financial Services Commission previously signed a Memorandum of Understanding (MOU) on the 21st at the Financial Supervisory Service in Yeouido, Seoul, with these two institutions and the Korea Inclusive Finance Agency for the 'Free Support Project for Debtor Representatives and Litigation Lawyers.'
Based on the MOU signed this time, the financial authorities plan to provide legal services such as representing debtors throughout the entire collection process and reviewing illegality through lawyers from the Korea Legal Aid Corporation to ensure financial consumers are not exposed to illegal debt collection.
Additionally, they intend to represent claims for return, damages, and lawsuits for confirmation of non-existence of debt caused by loans exceeding the maximum interest rate and illegal debt collection.
Those who have suffered or are at risk of suffering illegal debt collection damages from loan sharks, and those who have received loans exceeding the maximum interest rate (24% per annum) are eligible for support. Considering the beneficiary pays principle and financial capacity, applicants must have an income at or below 125% of the median income.
The project to appoint debtor representatives for victims of unregistered loan sharks will provide full support regardless of income requirements from the perspective of protecting crime victims. Starting in March, the financial authorities plan to establish an online application system to enhance convenience in applying for support.
Furthermore, application channels will gradually expand to allow applications through local government call centers and frontline police stations.
According to financial authorities, the scale of illegal private financing use in South Korea reached approximately 7.1 trillion KRW as of the end of 2018. As of the end of June last year, the scale of loan shark usage was about 16.7 trillion KRW.
In particular, the financial authorities are concerned that as illegal private financing use increases among vulnerable groups such as youth, housewives, and the elderly, damages caused by illegal debt collection will also increase.
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