Financial Supervisory Service Special Inspection of Loan Businesses: "Strong Response to Unfair Debt Collection"

Financial Supervisory Service, Yeouido, Seoul. Photo by Younghan Heo younghan@

On the 20th, the Financial Supervisory Service (FSS) announced that it had uncovered numerous cases of unfair infringement on property rights by loan sharks and excessive collection practices targeting vulnerable groups.

As a follow-up measure to the 'Illegal Private Finance Livelihood Field Meeting' chaired by President Yoon Seok-yeol in November last year, the FSS conducted a special inspection on loan sharks' livelihood-infringing debt collection practices. Due to high interest rates and continued economic downturn, the debt repayment burden on ordinary citizens has increased, and as loan sharks face worsening business conditions such as rising delinquency rates, incentives for livelihood-infringing and unfair debt collection practices have also increased.

During this inspection, the FSS confirmed that some loan sharks applied interest rates significantly exceeding the normal delinquency interest rate (+3 percentage points) and filed for unfair auction dividends.

It was also found that loan sharks seized household appliances necessary for daily life, such as TVs and refrigerators, from vulnerable groups, and in some cases, failed to notify debtors of the initiation of collection or related information.

Additionally, many loan sharks extended the statute of limitations on debts without documenting the reasons in writing, showing negligence in internal controls necessary to prevent unfair extensions of the statute of limitations.

The FSS stated that it guided the refund of unfairly collected auction dividends to borrowers and instructed loan sharks not to seize household appliances of vulnerable borrowers. It also plans to hold a workshop for the loan industry in the first half of this year to provide compliance education aimed at protecting the rights and interests of loan users.

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