One Report Ends Illegal Private Lending... From Collection Halt Warnings to Account Freezes with One-Stop Relief

FSS to Launch Dedicated Victim Support System in March
FSS Governor to Issue "Certificate of Nullity" for Illegal Loan Contracts

Going forward, when a victim of illegal private lending files a report, the financial authorities will request an investigation from the National Police Agency, issue warnings to illegal lenders to halt debt collection, and ask financial companies to suspend accounts related to illegal private lending, thereby establishing a one-stop support system for victim relief. For illegal loan contracts, the Financial Supervisory Service (FSS) will also issue a certificate confirming the nullity of the contract in the name of the FSS Governor.

On the 11th, Park Jiseon, Head of the Consumer Protection Bureau at the Financial Supervisory Service, held a meeting on eradicating livelihood-infringing financial crimes with executives of financial associations and Chief Consumer Officers (CCOs) in charge of consumer protection at major financial companies in banking, insurance, and securities, and announced these measures.

The Financial Supervisory Service will first operate, starting in March, a one-stop, comprehensive, dedicated support system that provides immediate relief when a victim of illegal private lending files a report. Once the victim files a single report, the FSS will submit integrated requests to relevant institutions for all necessary relief measures, including blocking the perpetrator’s phone number, appointing a debt representative and filing lawsuits for nullification, and requesting investigations by the National Police Agency. Information on illegal private lending accounts reported by victims will be provided to financial companies so that, if the customer cannot be verified, transactions in the relevant accounts are immediately suspended.

In addition, the Financial Supervisory Service will directly contact illegal private lenders to warn them to stop debt collection, and for antisocial illegal loan contracts, it will issue certificates confirming the nullity of the contracts in the name of the FSS Governor.

Furthermore, to eradicate illegal private lending, the Financial Supervisory Service is pursuing the introduction of a special judicial police force for livelihood-related matters, which will have direct investigative authority.

To prevent livelihood-infringing financial crimes, the internal control systems of financial companies will also be more strictly inspected. The FSS will check whether financial companies have their own response capabilities for preventing financial crimes, and will strengthen the linkage between consumer protection departments and anti-money laundering departments so that the detection of financial crimes and follow-up measures such as transaction suspension can be carried out smoothly. It also plans to step up supervision by checking whether financial companies comply with the Personal Debtor Protection Act, so as to promote debt restructuring and establish sound business practices.

In addition, to respond to sophisticated insurance fraud schemes in which hospitals and insurance planners collude, the Financial Supervisory Service will strengthen the precision detection capabilities of the Insurance Fraud Detection System (IFAS). It also plans to encourage whistleblowing by insiders through operating special reporting periods and improving the reward system. To respond to voice phishing, it will use an artificial intelligence (AI) platform to analyze and share information on suspicious domestic and overseas criminal accounts.

Park stated, "Once the special judicial police for illegal private lending is introduced, investigations will begin swiftly after victim reports are received, and we will prove the illegality based on financial expertise to block the spread of damage at an early stage," adding, "We will make this year the first year of 'breaking cruel finance' and, with the Task Force for Responding to Livelihood Crimes at the center, we will work with relevant agencies belonging to the pan-government task force (TF) to implement a comprehensive and systematic response."