Illegal Loan Businesses Rampant, Impersonating Public Institutions and Financial Firms Amid COVID-19

False and Exaggerated Ads Targeting Low-Income Individuals and Small Business Owners in Need of Emergency Funds
Lured by Promises of Low-Interest Conversion and Increased Limits...
Seoul City Issues Damage Alert

[Asia Economy, reporter Cho Inkyung] As false and exaggerated advertisements-such as impersonating financial institutions or offering loans exceeding legal limits-have become rampant, targeting low-income individuals and small business owners struggling financially due to COVID-19, the Seoul Metropolitan Government has issued an "Illegal Loan Business Damage Alert."

On April 20, Seoul City announced that many cases of illegal advertising involved impersonating public institutions or legitimate financial institutions. Numerous instances were found where mass text messages used phrases like "COVID-19 Debt Consolidation Loan," making it appear as if these were official financial products, or where loans for low-income individuals were falsely advertised. These cases often referenced government-backed microfinance products such as Sunshine Loan, Smile Microcredit, and Change Dream Loan.

There were also a significant number of false and exaggerated advertisements that misused the names of commercial banks and similar institutions, potentially misleading consumers.

Some schemes lured consumers by promising a credit rating upgrade, first requiring them to take out high-interest loans and then claiming these would be converted to low-interest loans within a month. In other cases, perpetrators used the promise of loans to obtain deposit accounts or check cards as collateral, which were then used for criminal purposes. There were also cases where borrowers were deceived into believing excess loans were possible, only to be charged brokerage fees upon loan execution.

To help consumers prevent such damage themselves, Seoul City not only issued the damage alert but also decided to intensify on-site inspections and supervision of loan businesses exploiting the COVID-19 situation. For companies found in violation of the law, administrative actions such as license revocation and business suspension will be imposed, along with strong measures including reporting to investigative authorities.

Victims can report related damages by visiting the "Seoul Illegal Loan Damage Counseling Center" located on Seosomun-ro in Jung-gu (open weekdays from 9 a.m. to 6 p.m.), calling the Dasan Call Center at 120, or using the online site "No More Tears."

When a report is filed, the Illegal Loan Damage Counseling Center investigates the loan interest rates, unjust profits, and outstanding debt status based on the financial transaction records submitted by the complainant. If a violation of the law by the loan business is confirmed, the center mediates agreements between the parties, such as the return of unjust profits or the waiver of remaining debt, to resolve creditor-debtor relationships. If necessary, free support from debtor representatives or litigation attorneys is provided, and in cooperation with related organizations, economic self-reliance support is offered to vulnerable victims.

Meanwhile, Seoul City conducts year-round crackdowns on illegal loan businesses, including ongoing monitoring and victim counseling. Last year, the Illegal Loan Damage Counseling Center provided relief for damages totaling 1.43 billion won. Among the reported cases, illegal high-interest loans accounted for 29.7%, while high-interest and illegal debt collection practices made up 38.8%.

Most complainants had used short-term loans with repayment periods of around 100 days, obtained through illegal loan flyers or loan brokerage websites. Many took out additional loans to repay existing debts or engaged in so-called "rolling over," with each person using two or more loan businesses (98 relief cases, 48 individuals).

Alongside crackdowns, Seoul City is also working to prevent damage by disclosing the names of illegal loan businesses and details of administrative actions, thereby raising legal compliance awareness among lenders. The city is also blocking or suspending phone numbers used in illegal loan advertisements.

Seo Sungman, Director of Labor and Livelihood Policy at Seoul City, stated, "As illegal activities by loan businesses targeting low-income individuals suffering from COVID-19 are a concern, we will strengthen joint crackdowns with related organizations such as district offices and focus on preventing further damage."

This content was produced with the assistance of AI translation services.