'Annual Interest Rate 30,000%' Illegal Private Loan Industry Crackdown Results in Mass Arrest of 861 People

Concerns Over Illegal Private Loans Spread Due to COVID-19 → Intensive Response Until Year-End
If You Suspect Illegal Private Loans... Search YouTube Channel 'Stop Illegal Private Loans!'

[Asia Economy Reporter Kangwook Cho] #. Since the outbreak of the novel coronavirus disease (COVID-19), self-employed individual A, who was struggling financially due to difficulties in running a restaurant, was deceived by an illegal loan shark promising to refinance loans at low interest rates and ended up losing even their business vehicle.

#. In Gyeonggi Province, nine members of an illegal lending organization were arrested for posting advertisements such as ‘loans for unemployed’ and ‘loans for credit delinquents’ on internet loan sites and conducting illegal lending activities. They lent approximately 3.5 billion KRW at an annual interest rate of up to 31,000% (a loan of 270,000 KRW with a repayment condition of 500,000 KRW the next day), causing damage to 3,610 victims.

Since the government declared a 'war on illegal private financing' last June, a total of 861 people have been arrested to date. Along with intensive crackdowns, the government has also decided to initiate tax investigations on tax evaders.

According to the Financial Services Commission and the Financial Supervisory Service on the 22nd, related enforcement agencies such as the police and local government special judicial police (special judicial police) conducted intensive crackdowns from June to August, resulting in the arrest of a total of 861 illegal private financiers.

As the prolonged COVID-19 pandemic has increased the number of people suffering from financial hardship, illegal private financing targeting ordinary citizens is rampant. In response, the government announced a 'Comprehensive Plan to Eradicate Illegal Private Financing' last June and designated the period until the end of the year as a special eradication period.

The police, deploying the Intelligent Crime Investigation Unit and the Metropolitan Investigation Unit intensively, arrested a total of 842 illegal private financiers, a 51% increase compared to the monthly average number of arrests before the intensive crackdown (January to May), and detained 10 of them.

The special judicial police of Seoul and Gyeonggi Province detected 6 offenders through mystery shopping using collected illegal flyers and arrested a total of 19 individuals, 13 of whom were referred to the prosecution.

The National Tax Service has detected dozens of tax evasion cases by illegal private financiers and plans to sequentially initiate tax investigations.

The Financial Supervisory Service and the Korea Legal Aid Corporation provide counseling for victims of illegal private financing and offer free support from debt representatives and litigation lawyers.

The Illegal Private Financing Victim Reporting Center established at the Financial Supervisory Service received 1,235 victim consultations, a 58% increase compared to the same period last year.

Seoul and Gyeonggi Province have set up and operated 'Visiting Illegal Private Financing Victim Counseling Centers' 12 times at traditional markets, shopping districts, and industrial complexes. The reported cases are undergoing professional legal counseling (453 cases) through the Korea Legal Aid Corporation, with legal remedies (95 cases) such as free appointment of debt representatives and litigation lawyers in progress.

The Korea Inclusive Finance Agency also provides customized counseling and has supplied alternative funds such as the Sunshine Loan 17 to about 21,000 low-credit individuals vulnerable to illegal private financing, totaling 133.6 billion KRW.

As damages continue, financial authorities have been strengthening public awareness campaigns on prevention and relief systems and procedures related to illegal private financing through YouTube channels such as 'Stop Illegal Private Financing' since this month. They are also promoting awareness through subway, bus, and taxi wrapping advertisements, radio ads, and 'Visiting Victim Counseling Centers.'

A Financial Services Commission official stated, "Ahead of the Chuseok holiday, there is concern about illegal private financing damages such as ultra-high-interest loans and illegal debt collection targeting financially strained ordinary citizens. We will continue to eradicate illegal private financing through close inter-agency cooperation at the government level during the special eradication period until the end of the year."