One Main Suspect Detained, 14 Transferred Without Detention
Targeting Small Business Owners with 'Tongdae Hwan Daechul' Scheme
Police Seek Pre-Indictment Seizure of 3.6 Billion Won Crime Proceeds
On the 27th, the Mapo Police Station in Seoul sent Mr. A (33) to prosecution in custody on charges of violating the Loan Business Act, and sent 14 others including Mr. B (24) to prosecution without detention. Photo by Mapo Police Station, Seoul
[Asia Economy Reporter Yoo Byung-don] A large group of illegal loan sharks who lent money to small business owners struggling financially and charged interest rates exceeding 2000% per year were arrested by the police.
On the 27th, the Mapo Police Station in Seoul announced that they had arrested and sent Mr. A (33) to prosecution on charges of violating the Loan Business Act, and sent 14 others, including Mr. B (24), to prosecution without detention.
They are accused of lending 130 billion KRW to over 2,300 small business owners in difficult circumstances from February 2019 to December last year using a method called "Tongdaehwan loan," applying a high interest rate of 15% per week, which exceeds 2000% annually, and extorting 18 billion KRW in interest.
Tongdaehwan loan is a method where a loan company lends repayment money to a debtor who has a high-interest loan, raises their credit rating, and then recovers the money by having the debtor take out a low-interest loan from banks or other financial institutions to pay off the principal and interest.
Among the victims, one was confirmed to have borrowed 42 million KRW in principal and repaid 6.3 million KRW in interest within 20 days. Calculating the interest rate, it was an exorbitant 273% annually. Another victim paid 4.8 million KRW in interest over 21 days on a principal of 32 million KRW, which also amounted to a high annual interest rate of 260%.
Additionally, it was revealed that they extracted information about the debtor’s family or acquaintances and used it to pressure repayment. They reportedly threatened debtors by saying, "If you do not respond within an hour after we call, we will consider you to have gone into hiding and will call your parents to collect the money."
Police investigations revealed that their crimes were carried out mainly through two call centers. The first call center handled loan advertisements and recruitment of loan applicants, while the second call center was responsible for verifying loan eligibility, consulting with loan applicants, executing loans, and collecting principal and interest. In particular, the ringleader Mr. A managed the crime funds only in cash and checks and made employees use aliases and burner phones, evading police investigations for a long time with meticulous methods.
The police applied to the court for pre-indictment seizure and preservation of 3.6 billion KRW confirmed as criminal proceeds through seized financial ledgers. Since the police were granted the authority to apply for pre-indictment seizure in September 2020, this is the largest amount in a single illegal private loan case.
A police official said, "Financially vulnerable groups such as small business owners and youth should be cautious not to fall for the temptation of unregistered loan companies," and added, "We will continue to crack down on illegal loan sharks who exploit the financially weak."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
