Illegal Loan Sharks Deceive Borrowers by Claiming Transaction Records Needed
Induce Small Loans, Embezzle Interest Only, Then Cut Contact
Financial Supervisory Service Issues Consumer Alert and Requests Police Investigation
# Victim A urgently needed funds for business and applied for a loan of 5 million won through a loan brokerage agent discovered via text message advertisement. After signing the loan contract, the agent informed A that a transaction history of borrowing 200,000 won and repaying 450,000 won was required, and that if this was done for just one week, the desired loan would be approved. A complied accordingly. One week later, the agent said the preliminary loan approval had passed and requested the same transaction history again, receiving 200,000 won by the same method and repaid 450,000 won after another week.
The agent then insisted that the official result was out and that the transactions must continue to maintain eligibility for the loan. Since A urgently needed the funds, the same transaction was repeated four more times, but ultimately the desired loan was never granted. During this process, the agent fraudulently collected ultra-high interest at an annual rate of 6517.9% (1.5 million won) over six occasions.
The Financial Supervisory Service (FSS) recently issued a consumer 'caution' alert on the 26th, reporting that illegal loan operators have been coercing borrowers into ultra-high interest illegal loan transactions under the pretense of executing loans worth hundreds of thousands to millions of won, then absconding after collecting only the exorbitant interest, with numerous fraud cases being reported consecutively.
Fraudsters approach low-credit borrowers who need loans of hundreds of thousands to millions of won, claiming that transaction records or credit verification are necessary for loan approval, and force them to repeatedly take out ultra-high interest short-term loans. They then collect only the exorbitant interest and do not provide the loans requested by consumers, creating a high risk of consumer damage. In particular, the fraudsters impersonate registered loan companies, misleading consumers into believing that additional short-term loans under certain conditions are mandatory procedures. They exploit the fact that consumers are more likely to comply with small deposit requests but are less inclined to report the fraud.
According to the FSS, while previous illegal private loan fraud cases mainly involved high interest rates and illegal debt collection targeting low-income people who used illegal loans for small amounts such as living expenses, recent short-term loan frauds target consumers who need hundreds of thousands to millions of won but find it difficult to use formal financial institutions and have some capacity for small repayments, aiming to extort ultra-high interest. For example, lending 100,000 won and demanding repayment of 300,000 won after 7 days (annual interest rate of 14,286%), then lending 300,000 won and demanding repayment of 500,000 won after 7 days (annual interest rate of 3,476.2%) to extort interest.
Short-term loan fraud begins when victims inquire about loans through online loan brokerage platforms or text advertisements and receive contact from illegal operators impersonating registered loan companies, claiming loans of hundreds of thousands to millions of won are possible and encouraging loan applications. In these cases, the loan contract and business cards include the name, registration number, and address of the registered loan company to impersonate them, but the phone numbers often do not match those listed in the 'Integrated Registered Loan Company Inquiry' service.
They also disguise these as unavoidable procedures for transaction records or credit verification. Exploiting consumers who urgently need loans of hundreds of thousands to millions of won, they first induce short-term loan transactions under the pretext of transaction records and credit verification. In some cases, they deceive victims by claiming that interest paid for transaction records will be refunded later, encouraging repeated small transactions.
Furthermore, they exploit the high likelihood that victims will comply with small deposit requests for loan approval and the low willingness to report small damages of around 1 to 2 million won. They often induce repeated transactions under various pretexts such as the need for additional transaction records or changes in loan queue order.
Accordingly, the FSS announced that it has requested police investigations simultaneously with issuing the consumer alert to prevent further damage. It has identified some recent cases as the work of the same perpetrator. The FSS emphasized, "Please first verify whether the transaction counterpart is a registered loan company," and warned, "Requests for high-interest short-term loans or money for loan approval are fraudulent." It also urged consumers to check first whether they can use policy-based financial products for low-income people if they need a loan.
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