The Supreme Court has ruled that borrowing tens of millions of won from credit card companies via smartphone apps for the purpose of 'rolling over' debt does not constitute fraud. The court explained that it is difficult to view the loan process as involving 'acts of deception.'
The Supreme Court's Third Division (Presiding Justice Kwon Youngjun) overturned the lower court's verdict, which had sentenced Mr. A, who was indicted on fraud charges, to eight months in prison with a two-year suspended sentence, and remanded the case to the Seoul Southern District Court on March 27 (2024Do18441).
[Facts]
In June 2022, Mr. A took out a loan of 18.5 million won from Hyundai Card through its application, with an annual interest rate of 18.5% and a 27-month repayment term. On the same day, he obtained a total of 136.1 million won in loans from several other credit card companies using their apps. He exploited the fact that loan information between credit card companies is not shared in real time.
At that time, Mr. A was already burdened with nearly 300 million won in debt, including 200 million won owed to business partners and private lenders, and 100 million won in personal debts. His monthly credit card loan principal and interest payments also exceeded his monthly income. Ultimately, Mr. A was unable to repay the loans, continued to default, and filed for personal rehabilitation in October of that year.
[Key Issue]
Whether taking out loans via credit card company apps for the purpose of rolling over debt, without the intention to repay, constitutes fraud.
[Lower Court Ruling]
Both the first trial and the appeals court found Mr. A guilty and sentenced him to eight months in prison with a two-year suspended sentence.
The appeals court stated, "If one uses a credit card despite already being in a situation where, due to excessive accumulated debt, one has neither the intention nor the ability to repay the resulting loan obligations, this can be recognized as an act of deception or fraudulent intent under the crime of fraud. It can be sufficiently acknowledged that the defendant applied for these loans with fraudulent intent, and therefore, there is no error in fact-finding or legal interpretation regarding the establishment of fraud."
[Supreme Court Ruling]
The Supreme Court found that the crime of fraud was not established. According to Article 347 of the Criminal Act, the act of deception required for fraud means causing a person to be mistaken. Therefore, if there is no act of deceiving a person, one cannot be punished for fraud.
The bench explained, "It is evident that the defendant used the victim companies' applications installed on his mobile phone to input information such as the purpose of funds, assets, annual income, debt information, fixed expenditures relative to annual income, and credit score, and that the loans were processed automatically by the computer system and the funds were transferred to the designated account. There is no indication that any employee of the victim companies was involved in confirming the loan application or transferring the loan funds during the process."
The court continued, "Therefore, it cannot be said that the defendant deceived any employee or other person of the victim companies during the loan process. Since the defendant's actions did not involve deception of a person, they do not constitute fraud. The lower court maintained the first-instance guilty verdict, but this constitutes a legal error that affected the judgment, as it misunderstood the legal principles regarding acts of deception in fraud cases."
Reporter: Ahn Jaemyung, The Law Times
※This article is based on content supplied by Law Times.
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