Last Year, 1,001 Illegal Private Loan Debtors Received Proxy Support...11% Increase

73% of Applicants in Their 20s and 30s

Mr. A, a low-credit borrower, recently suffered a setback after borrowing money from an illegal private lender. Earlier this year, he borrowed 570,000 won under the condition of repaying 900,000 won after 7 days due to urgent financial needs. Despite repaying a total of 960,000 won between January and February, the lender demanded repayment of the principal, claiming that the repayment amount was just extension interest and the principal remained unchanged. The lender even threatened to contact Mr. A’s family to collect the debt.

In response, Mr. A applied to the Financial Supervisory Service for the 'Appointment of a Debtor’s Representative and Referral to Investigative Authorities,' and through the appointment of a debtor’s representative from the Korea Legal Aid Corporation, he was freed from the lender’s unfair demands. Feeling pressured by the subsequent police investigation, the lender returned the excess amount paid that exceeded the interest rate limit under the Interest Rate Restriction Act to Mr. A.

Last year, about 1,000 victims of illegal private financing were relieved from illegal debt collection and other issues through the government’s 'Free Debtor Representative Support Project.'

On the 25th, the Financial Services Commission announced that it supported the appointment of debtor representatives and related services for a total of 1,001 people and 4,510 cases last year. The number of people supported increased by 11.3% compared to the previous year, while the number of cases decreased by 7.6%.

The Free Debtor Representative Support Project is a system where lawyers affiliated with the Korea Legal Aid Corporation act on behalf of debtors to handle the collection process, review illegality, and represent them in claims for return of damages, compensation, and lawsuits to confirm non-existence of debt, aiming to protect victims of illegal private financing.

The support targets low-income victims who have suffered illegal debt collection from unregistered or registered lenders or have received loans exceeding the legal maximum interest rate (up to 20% per annum). However, for litigation representation, the beneficiary-pays principle and financial capacity are considered, limiting eligibility to those with an income below 125% of the median income (2,597,000 won per month for a single-person household).

According to the Financial Supervisory Service, a total of 1,238 debtors (4,625 debt cases) applied for debtor representative support last year, a 3.2% increase from the previous year. Among applicants, 44.7% (554 people) were multiple debtors holding two or more debts, nearly half, and 16.2% (201 people) had six or more debts.

Regarding victim cases, applications related to unregistered lenders accounted for 98.5% (4,555 cases), while registered lenders accounted for only 1.5% (70 cases). By type, 98.6% (4,558 cases) applied for relief from both exceeding the maximum interest rate and illegal debt collection.

By age group, those in their 20s accounted for the largest share at 38.9% (482 cases), followed by those in their 30s (34.1%), 40s (18.9%), 50s (6.1%), and 60s and above (1.9%). Notably, the proportion of applicants in their 20s and 30s has steadily increased since 2020 (57.8%).

Among them, the total number of people who actually received support such as appointment of debtor representatives was 1,001 (4,510 cases). The number of people supported has steadily increased from 346 in 2020, 899 in 2021, to 1,001 last year. The support rate compared to applications also increased continuously, reaching 73.4%, 85.6%, and 86.3%, respectively, indicating the project has become well established.

Of the total 4,510 supported cases, 99.2% (4,473 cases) were handled by lawyers affiliated with the Korea Legal Aid Corporation acting as debtor representatives, and 28 cases received free litigation representation, while 9 cases were resolved through pre-litigation settlements (such as mediation), protecting the rights of debtors.

The government plans to strengthen the Free Debtor Representative Support Project to prevent illegal private financing damage, while also enhancing support for low-income financial services and cooperation with investigative agencies. Additionally, as the proportion of applicants in their 20s and 30s is increasing, related education and publicity efforts will be intensified.

Yoo Jae-hoon, Director of the Financial Consumer Bureau at the Financial Services Commission, stated, “We will actively operate and promote the project so that more people can be protected from illegal debt collection. The government will continue to investigate and crack down on illegal private financing, actively supply policy-based low-income financial services, and consistently conduct education and publicity to prevent damage, responding comprehensively and systematically.”

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