Illegal Private Lending Threatens Ordinary Citizens... Police Arrest 1,553 in Six Months

Emergence of New and Evolving Tactics, Including Demands for Family Members' Personal Information

#. The Mapo Police Station in Seoul arrested a group of eight individuals on charges including violation of the Loan Business Act, detaining four main suspects including Mr. A. From August 2024 to January of this year, Mr. A and his accomplices illegally lent a total of 1.7 billion won to over 600 victims via the internet without registering as a moneylender. They also extorted approximately 840 million won in fees. The group even used apps that automatically make repeated phone calls to engage in illegal debt collection activities.

The police are intensifying special crackdowns on illegal private loans that threaten the livelihoods of ordinary citizens.

On May 14, the National Office of Investigation at the Korean National Police Agency stated that crimes committed by illegal private lenders are increasingly shifting to non-face-to-face and online platforms such as social networking services (SNS), resulting in ongoing victimization. The police launched their first crackdown in November 2022 and have since extended the operation four times. The nationwide special crackdown will continue until October this year.

The primary targets of this crackdown are unregistered loan businesses, high-interest usury, and illegal debt collection. The police will also strictly crack down on the use of burner phones, fake bank accounts, and the illegal distribution of personal information. Over the past six months, the police conducted crackdowns that led to the detection of 1,284 cases and the arrest of 1,553 individuals (including 51 who were detained). Compared to the same period last year, the number of cases detected increased by 37.5%, and the number of people arrested increased by 19.0%. This is the result of establishing dedicated investigation teams at direct investigation departments of local police agencies and the intelligence teams at the police headquarters.

By type of crime, the breakdown of offenders is as follows: violation of the Act on the Collection of Claims, 955 people (43.1%); violation of the Loan Business Act, 949 people (42.8%); and violation of the Interest Rate Limitation Act, 312 people (14.1%). More than half of the victims were in their 20s and 30s.

During this crackdown, the police uncovered numerous new and evolving illegal activities, including: ▲ cases where illegal private lenders demanded the personal information of acquaintances or family members as collateral during the illegal lending process, then used that information for illegal debt collection if repayment was not made; ▲ durable goods loans involving the recruitment of low-credit individuals, leasing electronic products to them, and then selling those items to dealers in stolen goods; and ▲ small-amount loan schemes disguised as advance sales of gift certificates.

A representative from the Korean National Police Agency stated, "We will analyze the main methods and relevant legal principles and share them with investigative teams in the field," adding, "We will closely examine vulnerabilities in the financial security of ordinary citizens that may be overlooked and will devote all available resources to the effort."

Meanwhile, under the amended Loan Business Act that came into effect in July last year, if the annual interest rate exceeds 60% or if there are anti-social acts such as sexual exploitation, human trafficking, violence, or threats during the contract process, the contract itself is invalid. Not only are there no repayment obligations for the principal or interest, but any principal or interest already paid can also be recovered. The police urged the public to actively utilize the illegal private loan one-stop comprehensive support and dedicated response system.

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