Financial Services Commission Provides Free Representation for Debtors in 4,841 Illegal Private Loan Cases

[Asia Economy Reporter Song Hwajeong] # Mr. A borrowed 200,000 won under the condition of returning 400,000 won after one week from a creditor he met through an internet loan cafe in November last year, after providing phone numbers of his coworkers, friends, and family. If he failed to repay the principal and interest in full within the set period, he agreed to pay an extension fee of 200,000 won. Mr. A paid the extension fee once and extended the period, then repaid 400,000 won in December. However, the creditor claimed that since the set period had passed, the 400,000 won repaid by Mr. A was the extension fee and demanded payment of the remaining principal and interest, continuously contacting and threatening him. In response, Mr. A applied for the appointment of a debtor representative through the Financial Supervisory Service, and the case was resolved by returning the amount agreed upon through mediation by the debtor representative.

The government's free support system for debtor representatives and litigation lawyers is establishing itself as a social safety net against illegal private loans. The number of applicants and supported cases increased significantly last year.

According to the Financial Services Commission on the 1st, 1,200 debtors who suffered from illegal private loan damage by unregistered lenders applied for debtor representative appointment support to the Financial Supervisory Service last year. The number of debt cases was counted as 5,611. The number of applicants and debt cases surged by 89.9% and 292.7%, respectively, compared to the previous year.

Since January 2020, the government has been conducting a free debtor representative support project for victims who suffered illegal debt collection from unregistered or registered lenders or received loans exceeding the legal maximum interest rate.

Among the applicants, 549 were multiple debtors holding two or more debts, accounting for 45.7% of the total, increasing by 14.4 percentage points compared to the previous year. In particular, 242 multiple debtors had six or more debts, up 12.3 percentage points from the previous year, with some cases holding up to 93 debts.

Applications related to unregistered lenders accounted for 5,484 cases, or 97.7%. By type of damage, 5,509 cases (98.2%) applied for relief from both exceeding the maximum interest rate and illegal debt collection.

Among the applicants, those in their 30s accounted for the largest proportion (37.9%), increasing from 34.7% the previous year. Due to expanded application methods such as mobile, the proportion of applicants in their 20s also rose from 23.1% to 30.4% compared to the previous year.

Last year, the Financial Supervisory Service and the Korea Legal Aid Corporation reviewed whether the applications for debtor representatives and others were eligible for support and provided debtor representative appointments and other support for 4,841 cases. The Financial Services Commission explained, "Support performance increased significantly compared to 919 cases the previous year due to improvements in support procedures and simplification of document submission methods. We improved the system to allow appointment notifications not only in writing but also electronically, and enabled online submission of documents such as personal information consent forms required for support."

A Financial Services Commission official said, "We will strengthen linkage with self-support programs such as the Korea Inclusive Finance Agency and respond to additional support demands through budget securing. To eradicate illegal activities, we will strengthen cooperation with investigative agencies such as the National Police Agency and actively strive to support debtor representatives and relief for illegal private loan damage."

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