Seoul City Actively Steps Up to Protect Against Illegal High-Interest Loan Damage... Operates Focused Reporting Period

Relief for Unregistered Businesses, Illegal High-Interest Rates, Debt Collection, and Loan Advertising Damages
Presentation of Case-Specific Relief Measures, Free Legal Support Guidance, Introduction of 10 Illegal Debt Collection Cases

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced on the 19th that it will operate a focused reporting period for illegal lending damages from the 20th of this month to the 29th of next month, targeting unregistered lending businesses, illegal high-interest loans and debt collection, and illegal lending advertisements.

During the focused reporting period, damages reported will be deeply consulted and analyzed by professional investigators, lawyers belonging to the ‘Seoul Illegal Lending Damage Counseling Center,’ and dispatched staff from the Financial Supervisory Service. They will propose relief measures suitable for the type of damage and provide legal support guidance if necessary. In particular, strong measures such as requesting investigations will be taken against violating businesses or illegal debt collectors.

The Seoul Metropolitan Government emphasized that it plans to focus on relief for cases of ‘high-interest loan damages’ and ‘illegal debt collection’ arising from the process of securing emergency funds by financially vulnerable groups struggling with livelihood difficulties due to COVID-19, including those exceeding the legal maximum interest rate of 20%. In fact, among the total 378 damage cases reported to the ‘Seoul Illegal Lending Damage Counseling Center’ last year, consultations on ‘high-interest and ultra-short-term loans’ accounted for the largest portion with 172 cases (45.5%), followed by ‘illegal debt collection’ with 122 cases (32.3%).

The subjects for reporting include: ?Operation of unregistered lending (brokerage) businesses ?High-interest lending violating the legal maximum interest rate (20%) ?Illegal debt collection (assault, threats, late-night visits/calls, etc.) ?Illegal lending advertisements ?Acts of extorting brokerage fees, etc.

The city plans to carefully examine loan interest rates especially during this focused reporting period. First, based on the financial transaction details submitted by the reporter, the interest rate will be calculated, followed by an investigation into whether there was an overpayment of principal and interest or any remaining debt. The relevant amount will then be notified to the debtor. If the debtor has overpaid the principal and interest, the case will be resolved by inducing an agreement between parties such as ‘return of unjust enrichment’ or ‘waiver of remaining debt’ to terminate the creditor-debtor relationship.

Additionally, debtors who have concerns about or have suffered damages from illegal collection or violations of the maximum interest rate by creditors will be actively guided to government-supported debtor representatives and litigation lawyer support projects free of charge, focusing on practical relief such as guidance on bankruptcy and rehabilitation systems.

The city emphasized that debt collectors’ acts such as using violence or threats against debtors or related persons in relation to debt collection, repeated or nighttime (9 PM to 8 AM) calls or visits (to debtors, family members, and related persons), and demanding debt repayment from third parties other than the debtor (including guarantors) are all considered illegal collection acts. Therefore, it is necessary to actively report by securing related evidence such as mobile phone recordings, audio recordings, and witnesses as much as possible.

Illegal collection offenders are subject to penalties depending on the violation, including ‘imprisonment for up to 5 years or a fine of up to 50 million KRW’ or ‘imprisonment for up to 3 years or a fine of up to 30 million KRW.’ Reports or consultations regarding illegal collection acts can be made through the Seoul Illegal Lending Damage Counseling Center, the Seoul Fair Trade Comprehensive Counseling Center website, or the Dasan Call Center.

Meanwhile, the Seoul Metropolitan Government operates the ‘Seoul Illegal Lending Damage Counseling Center’ to protect citizens from illegal lending damages. In 2021, the number of consultations totaled 378, similar to the previous year (376 cases), but non-face-to-face (phone) reports (311 cases) increased by 30 cases (10.7%) compared to the previous year, and the relief amount significantly increased by more than 200% to 733 million KRW from 233 million KRW the previous year.

To fundamentally block illegal lending advertisements, the ‘Daepo Killer’ system is planned to be expanded to autonomous districts in the second half of the year. Also, to prevent chronic illegal acts by lending (brokerage) businesses, joint on-site inspections by the city and districts will be conducted by the end of the year targeting 734 lending businesses to check for illegal high interest rates, excessive lending, and illegal fee collection. For businesses caught in the crackdown, swift administrative actions such as fines and business suspension, as well as strong measures like immediate investigation requests, will be taken.

Lee Byung-wook, the Seoul Metropolitan Government’s Fair Economy Officer, said, “Many people who suffer from illegal lending damages hide the facts due to concerns about revealing their identity or do not recognize the damage itself due to lack of understanding of the law. We will minimize the suffering of ordinary people and consumer damages caused by illegal lending through continuous on-site crackdowns even after the focused reporting period.”

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