"Illegal Private Loan Reports Increase 5 Times in 4 Years, Sentencing Remains Unchanged"

Published 13 Feb.2025 07:45(KST)

National Assembly Holds Forum on Sentencing Guidelines for Loan and Debt Collection Businesses

To reduce the financial harm experienced by vulnerable groups caused by illegal private lending and debt collection processes, the National Assembly discussed measures to establish appropriate sentencing guidelines for crimes violating the Loan Business Act and the Debt Collection Act.

Democratic Party lawmakers Park Hee-seung (62, Judicial Research and Training Institute class 18) and Chun Jun-ho held a forum titled “Discussion on Raising Sentencing Guidelines for Crimes Violating the Loan Business Act and the Debt Collection Act” on the 11th at the 8th Conference Room of the National Assembly Members’ Office Building in Yeongdeungpo-gu, Seoul.

Increasing Card Debt Rollovers and Illegal Private Loans. Yonhap News

In his opening remarks, Rep. Park stated, “Recently, the number of consultations and reports on illegal private finance damage has surged to five times the level of four years ago, indicating that illegal private lending damage is becoming severe. However, the sentencing guidelines for crimes violating the Loan Business Act and the Debt Collection Act have remained unchanged since their establishment in 2017,” emphasizing the issue.

Rep. Chun also explained the necessity of raising sentencing guidelines, saying, “While various institutional improvements for legal amendments are important, above all, there is a social consensus that punishments and fines for illegal lenders and illegal debt collectors must be strengthened.”

Currently, even with aggravated punishment, violations of the Debt Collection Act carry a maximum imprisonment of 3 years and 6 months. Violations of the Loan Business Act generally recommend a maximum imprisonment of 1 year and 6 months, and even with aggravated punishment, the maximum sentence is limited to 4 years.

Professor Lee Sang-bok of Sogang University Law School suggested in his presentation, “Unlike the current Loan Business Act, Japan’s Money Lending Business Act and other financial business laws regulate the respective financial businesses under general laws, while punishments for illegal finance are governed by separate laws. It is necessary to separate the provisions concerning illegal private lenders under the Loan Business Act and establish a new law for punishing illegal finance or regulate it comprehensively through the Interest Rate Restriction Act.” Cha Sang-jin (41, 3rd Bar Exam), Secretary General of the Banking Law Association, emphasized, “Illegal private lenders often commit multiple crimes, but actual complaints are rare, and the current law’s sentencing is low, so investigations and punishments tend to be deprioritized compared to serious crimes. There is a need to establish sentencing guidelines that correspond to the severity of crimes violating the Loan Business Act and the Debt Collection Act.”

Meanwhile, according to the amendment to the Loan Business Act passed by the National Assembly in December last year, the term for unregistered lenders has been changed to ‘illegal private lenders,’ and illegal loan contracts that involve sexual exploitation debt collection, human trafficking, bodily injury, or apply interest rates three times higher than the statutory maximum interest rate (20%) are declared null and void for the entire principal and interest.