Non-Face-to-Face Loan Without Repayment Ability... Supreme Court: "No Fraud If Screening Is Automatic"

If There Is No Direct Involvement by Financial Institution Employees,
It Is Not Considered "Deceiving a Person"
Supreme Court: "Lower Court Misunderstood Legal Principles"... Case Overturned

A court has ruled that an individual who obtained a card loan through a non-face-to-face screening process, without the intention or ability to repay the loan, cannot be punished for fraud. The decision was based on the reasoning that there was no act of deceiving another person.

According to the legal community on April 21, the Supreme Court's Second Division (Presiding Justice Kwon Youngjun) overturned a lower court's verdict that sentenced an individual identified as Park to eight months in prison with a two-year suspended sentence for fraud, and remanded the case to the Seoul Southern District Court. The Supreme Court found that the previous ruling was unlawful because it misunderstood the legal principles regarding fraudulent acts under the crime of fraud, which affected the outcome of the case.

Park was brought to trial in 2023 on charges of embezzling 34.5 million won through two separate loans by using a card company app installed on a mobile phone, despite having neither the intention nor the ability to repay the loans. Park planned to borrow a total of approximately 130 million won from multiple card companies by exploiting the fact that loan information is not shared when card loans are taken out simultaneously on the same day. In reality, Park's existing debt was found to be nearly 300 million won, and the monthly principal and interest payments exceeded monthly income.

Both the first and second trial courts found Park guilty of fraud and sentenced Park to eight months in prison with a two-year suspended sentence. However, the Supreme Court stated, "Under criminal law, a fraudulent act, which is a requirement for establishing the crime of fraud, is defined as causing a person to be mistaken," and added, "If there is no act of deceiving a person, one cannot be punished for fraud." In line with existing Supreme Court precedents, Park's actions?using non-face-to-face loan processes?were not considered fraud.

The Supreme Court further explained, "The defendant entered information such as the intended use of funds, owned assets, and annual income into the victims' apps, and the loans were processed automatically, resulting in the funds being transferred." The Court continued, "There is no evidence that any employee of the victim companies confirmed the loan applications or was involved in the transfer process. Therefore, it cannot be said that the defendant deceived any employee of the victim companies or any other person."