Korea Financial Investment Association Reports on Relief Efforts for Illegal Private Loan Victims
593 Victims Received Transaction Verification Services Last Year
#Daily worker Mr. Noh sought a loan from a lending company to cover living expenses but was denied due to low credit. Recently, as loan delinquency rates have risen, loan screening has also been tightened. After seeing a spam message, Mr. Noh borrowed 450,000 won from a private lender on the condition of repaying 700,000 won including fees within a week. If he failed to repay on time, he would have to pay an additional 250,000 won every week. Ultimately, he deposited 1,350,000 won to the private lender.
On the 29th, as the COVID-19 pandemic continues unabated, illegal loan business card-type flyers from private loan companies are scattered across the streets of Insadong, Jongno-gu, Seoul. Photo by Moon Honam munonam@
On the 24th, the Korea Financial Investment Association announced that the annual interest rate for illegal private loans reached 503% last year. This exceeded the legal maximum interest rate of 20% by about 25 times.
Analysis of the illegal private loan transaction verification service data by the association revealed that last year, victims faced an average annual interest rate of 503%, with loan amounts averaging 11 million won and loan periods averaging 49 days.
The association provides a service that verifies illegal private loan transaction details for victims and issues certificates calculating the actual interest rates. This is because, due to the irregular and non-fixed nature of loan and interest repayments in illegal private loans, it is difficult for victims and judicial authorities to accurately calculate interest rates.
The association reported that it provided 14,453 illegal private loan transaction verification services to 593 victims last year.
When illegal private loan victims apply for debt adjustment, the association negotiates with illegal lenders to adjust debts within the legal interest rate, supporting victim relief efforts.
Last year, 40 million won of outstanding illegal private loan debts from 17 cases were fully waived. For 9 cases where interest payments exceeded the legal cap, 21 million won of excess interest was refunded to the debtors.
If you suffer from illegal private loan damage, you can prepare loan transaction details and contract-related documents and contact the association’s Consumer Protection Department to receive relief.
Jung Sung-woong, the association president, stated, "We will work with related organizations to prevent financially vulnerable groups from falling victim to illegal private loans and to establish lending finance as a sound industry responsible for serving the public, promoting prevention and relief activities."
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