Seoul City to Intensify Crackdown on 'Illegal Loan Companies' Ahead of Chuseok... Cooperating with Autonomous Districts and Financial Supervisory Service

Intensive Inspection of 'Ultra-Short-Term High-Interest Daily Loans', Investigation into Exceeding Legal Maximum Interest Rates and Misleading Advertising

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced on the 23rd that, ahead of Chuseok, it expects illegal activities such as ultra-short-term high-interest daily loans to run rampant among market merchants suffering economic difficulties due to the prolonged COVID-19 social distancing measures, and will launch a joint crackdown with related agencies starting from the end of August.

The main crackdown items include ▲illegal high-interest daily loans (up to 20%) ▲illegal debt collection (assault, threats, leakage of personal information) ▲loan advertisements through illegal spam (false or exaggerated advertisements, disclosure of loan conditions), as well as ▲loan contract entries (interest rate, repayment method, incidental costs, early repayment conditions, handwritten entries) ▲restrictions on delinquent interest rates (contract interest rate + 3%) ▲illegal collection of collateral rights establishment costs (legal scrivener fees, appraisal fees, notarization fees), among others.

Seoul plans to maximize effectiveness by closely cooperating with traditional market merchant associations and shopping district promotion associations to enhance prevention of damages caused by illegal lending activities and the effectiveness of crackdowns and investigations. During inspections, 70,000 copies of a self-produced ‘Damage Prevention and Reporting Guide’ will be distributed to traditional market merchants and shopping district promotion associations, and in cooperation with these associations, damage prevention and reporting announcements will be broadcast 1 to 2 times daily as part of active publicity efforts.

Additionally, dedicated investigators will be dispatched and stationed at each traditional market to conduct victim interviews, and support for damage relief will be strengthened by securing concrete evidence and confirming illegal flyer distribution motorcycles and vehicle license plates through CCTV.

Administrative measures such as fines and business suspension will be taken against companies caught in this joint inspection. In particular, if violations of interest rates or illegal collection activities are detected, active investigations will be conducted along with administrative actions to impose criminal penalties. From January to June this year, Seoul conducted on-site (and written) inspections of 543 loan brokerage businesses’ loan advertisements, identifying legal violations and imposing a total of 133 administrative measures including fines (38 cases), business suspensions (17 cases), and administrative guidance (78 cases).

Meanwhile, Seoul operates the ‘Illegal Loan Business Damage Counseling Center,’ staffed by professional investigators, city civil complaint officers, and dispatched employees from the Financial Supervisory Service, to provide ongoing support for citizens suffering from illegal loan business damages, including damage counseling and specialized legal consultations. Seoul emphasized that illegal private financing operations often use non-face-to-face methods such as phone calls and text messages, and frequently use burner phones and fake bank accounts, making identity verification difficult, thus urging citizens to actively report such cases.

Han Young-hee, Seoul’s Director of Labor, Fairness, and Coexistence Policy, stated, “Due to the economic difficulties faced by traditional market merchants caused by COVID-19, illegal private financing damages may increase, so we plan to take strong measures against legal violations through continuous and rigorous crackdowns and inspections.” Park Byung-hyun, Chief of the Seoul Civil Affairs Police Unit’s Safety Investigation Team, added, “We ask everyone to be especially cautious not to fall victim to illegal private financiers who impose economic pain and burdens by charging high-interest rates targeting financially vulnerable groups.”

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