Seoul City Intensifies Crackdown and Investigation on Illegal Lending Practices Including High-Interest Daily Loans

Intensive Inspection of Loan Companies Around Traditional Markets Until February

[Asia Economy Reporter Kiho Sung] The Seoul Metropolitan Government announced on the 12th that it will conduct intensive crackdowns and investigations on illegal loan businesses around traditional markets until the end of February to strictly respond to illegal private financing activities such as ultra-short-term high-interest daily loans targeting low-credit borrowers, including small business owners who face high loan barriers.

The main investigation targets this time are ▲illegal high-interest daily loans (annual interest rate exceeding 20%) ▲illegal loan advertisement flyers by unregistered businesses ▲illegal receipt of fees (such as gratuities and upfront fees) by loan brokers from their transaction counterparts.

Recently, illegal loan businesses have been exploiting the urgent psychology of small-scale retailers and wholesalers who need small emergency funds by lending small amounts such as 2 to 3 million KRW and collecting high interest rates. Typically, the method involves using 2 million KRW for 100 days and repaying daily interest of 22,000 KRW, which corresponds to an interest rate of 36.5%, exceeding the legal interest rate of 20% per annum.

The Seoul Metropolitan Government plans to dispatch investigators to traditional markets as needed to stay on-site and conduct victim interviews. If illegal activities of loan businesses are revealed through these interviews, they will secure concrete evidence through investigations. Upon confirmation of illegal acts, in addition to criminal charges, administrative measures such as fines and business suspension will be imposed by notifying the respective district offices.

Furthermore, Seoul plans to closely cooperate with traditional market merchant associations and shopping district promotion associations to maximize the effectiveness of prevention, crackdowns, and investigations related to illegal loan activities. During crackdowns, 60,000 copies of self-produced 'Damage Prevention and Reporting Guide' will be distributed to traditional market merchants and shopping district associations, and daily 1 to 2 broadcasts for damage prevention and reporting guidance will be conducted in cooperation with these associations to actively promote damage prevention.

Meanwhile, to prevent citizen damage caused by illegal loans, Seoul operates the 'DaePo Killer' system continuously and runs the 'Illegal Loan Business Damage Counseling Center,' a dedicated agency for damage relief services.

'DaePo Killer' is a system that automatically calls illegal loan business phone numbers every 3 seconds to keep the line busy, blocking communication between operators and borrowers. Introduced in October 2017, it has suspended a total of 7,364 illegal loan business phone numbers by 2022.

Since its opening in July 2016, the 'Illegal Loan Business Damage Counseling Center' has received damage reports from 2,575 people by 2022, providing information and legal counseling through professional counselors, investigators, and dispatched staff from the Financial Supervisory Service. Among these, 539 cases involving a total of 4.6 billion KRW in damages have been remedied.

Engaging in loan business or advertising without registration is punishable by imprisonment of up to 5 years or a fine of up to 50 million KRW, and exceeding the legal interest rate (20% per annum) is punishable by imprisonment of up to 3 years or a fine of up to 30 million KRW.

The Seoul Metropolitan Government urged citizens to actively report illegal loan businesses, as these operations often use non-face-to-face methods and burner phones, making it difficult to secure clues. If citizens report or tip off criminal acts with decisive evidence and contribute to public interest promotion, they can receive rewards of up to 200 million KRW after review under the 'Seoul Metropolitan Government Ordinance on Protection and Support for Public Interest Whistleblowers.'

Seo Young-gwan, head of the Seoul Metropolitan Government’s Civil Life Judicial Police Unit, stated, “We plan to take strong measures against violations of the law to prevent damage caused by illegal loans to small merchants in traditional markets,” adding, “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 to financially vulnerable groups.”

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