Byunghwan Kim Steps Up to Eradicate Illegal Private Lending, Vows to Strengthen Support for Victims

Byunghwan Kim Pledges Stronger Relief for Victims of Illegal Private Lending
Debtor Representative System and Nullification Lawsuits to Be Enhanced

Byunghwan Kim, Chairman of the Financial Services Commission (center), visited the Seoul Personal Rehabilitation and Bankruptcy Comprehensive Support Center of the Korea Legal Aid Corporation in Seocho-dong, Seoul, on the morning of the 23rd. He toured the legal support consultation site within the center, listened to cases of illegal private loan damage and difficulties faced by vulnerable low-income groups in using formal financial services from consultation staff, and then encouraged the consultation center employees and expressed gratitude for their hard work. Photo by Financial Services Commission

Byunghwan Kim, Chairman of the Financial Services Commission, pledged to strengthen efforts to eradicate illegal private lending and illegal debt collection, both of which have recently caused significant social harm, and to enhance support for victims.

On the morning of the 23rd, Chairman Kim visited the Seoul Personal Rehabilitation and Bankruptcy Comprehensive Support Center of the Korea Legal Aid Corporation in Seocho-gu, Seoul, and held an on-site meeting. He stated, "We will further strengthen support for relief measures such as the debtor representative system and nullification lawsuits, which are currently being implemented for those who have suffered damages from illegal private lending."

The debtor representative support program is a free legal service provided by the government for low-income and vulnerable groups who have either suffered or are at risk of suffering illegal debt collection from illegal private lenders, or who have taken out loans exceeding the legal maximum interest rate (20% per annum). Attorneys from the Korea Legal Aid Corporation act on behalf of debtors, handling all creditor collection processes such as phone responses, and also represent them in lawsuits. Since its launch in 2020, the program has received a strong response, with more than 3,000 cases handled each year.

Chairman Kim emphasized, "The amended Lending Business Act, which was passed by the National Assembly at the end of last year, is scheduled to take effect in July this year. With this amendment, the legal basis for nullifying anti-social lending contracts will be established, and illegal private lenders will be prohibited from collecting interest."

He added, "We will further strengthen cooperation between financial authorities, investigative agencies, and the Korea Legal Aid Corporation, including sharing information, to actively support victims of illegal private lending so that they can receive practical relief through nullification lawsuits and other means."

Chairman Kim also said, "To ensure the smooth implementation of the revised Lending Business Act, we will expedite the preparation of the enforcement decree, which will set detailed standards for nullifying ultra-high-interest lending contracts and registration requirements for online lending brokerage sites." In this regard, he requested active feedback and cooperation from related agencies and urged the lending industry to thoroughly prepare so that there is no confusion arising from the raised registration requirements.

He further explained, "Even before the amendment to the Lending Business Act takes effect, we will work with local governments and investigative authorities to intensify inspections of online lending brokerage sites, which are known to be the main channels for illegal private lending. We will also continue to expand enforcement measures to block illegal financial advertisements online and crack down on illegal activities."

Regarding concerns that the amendment to the Lending Business Act could reduce the supply of funds to low-income and vulnerable groups, Chairman Kim stated that the authorities will closely monitor and analyze the situation to devise appropriate countermeasures. He mentioned, "To expand financial support for low-income and vulnerable groups, we will seek ways to revitalize outstanding lending companies, such as improving their funding conditions, and will prepare a comprehensive support plan for inclusive finance by next month."

The on-site meeting was attended by officials from the Office for Government Policy Coordination, the Supreme Prosecutors’ Office, the Financial Supervisory Service, the Korea Legal Aid Corporation, as well as representatives from outstanding lending companies and the Korea Federation of Banks. Chairman Kim toured the legal support consultation site within the comprehensive support center, listened to consultation staff share cases of illegal private lending, difficulties faced by low-income and vulnerable groups in accessing formal financial services, and then encouraged the consultation center employees.

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