Loans Exceeding 60% Annual Interest Rate Are Invalid... Seoul City Launches Crackdown on Illegal Private Lending

The Seoul Metropolitan Government announced on the 26th that it will operate a “Special Reporting Period for Illegal Private Lending Damages” until June. This measure is in response to the continued harm suffered by citizens from illegal private lending, with targets including illegal ultra-high interest loans with annual interest rates exceeding 60%.

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Currently, loans with annual interest rates exceeding 60% are legally invalid. In addition, any lending contract that involves antisocial acts-such as demands for sexual recordings or videos, human trafficking, or bodily harm-during the process of concluding, renewing, extending, or changing the lending agreement is also considered invalid. If the contract involves assault, threats, confinement, or exploits the borrower’s distress or recklessness, or if there are violations of debt collection laws such as collection from family or acquaintances or leakage of personal information, there is no obligation for repayment.

Since 2016, the Seoul Metropolitan Government has operated the “Civil Economy Relief Center” to protect citizens from illegal lending businesses. Last year, the center handled a total of 303 counseling cases and provided relief for 84 cases, amounting to 812 million won. Compared to 2024, this represents a 24.7% increase in counseling cases and a 2.4-fold increase in relief amounts.

At the Civil Economy Relief Center, the annual interest rate is calculated for victims of daily or monthly lending, and if the annual interest rate exceeds 60% or if it is an antisocial illegal lending contract, victims are notified that both the principal and interest are invalid, after which relief procedures are initiated. If necessary, professional legal counselors (lawyers) are connected to provide free consultations during the special reporting period.

According to counseling cases received by the center in 2025, many victims took out ultra-high interest daily loans and, after failing to repay them by the due date, repeatedly received additional loans-a practice known as “Kkeokgi.” As a result, they often lost track of the total principal and interest, ultimately returning money as demanded by illegal lenders. In addition, since the “Free Legal Service for Debtor Representatives” was expanded from covering the debtor themselves to also include family members and acquaintances victimized by illegal collection, the city plans to actively encourage applications for free legal services and focus on providing practical relief through guidance on bankruptcy and rehabilitation systems.

During the special reporting period, the Seoul Metropolitan Government will conduct on-site campaigns targeting financially vulnerable groups who are more susceptible to illegal private lending, such as those in entertainment districts, traditional markets, and areas with many small business owners where access to institutional finance is limited. The city will immediately block phone numbers used in illegal lending advertisements by collecting flyers (through the Daepo Killer System), and will take strong measures such as requesting investigations for violations including illegal debt collection.

The “Daepo Killer System,” introduced in October 2017, is an unlimited automatic dialing program. By calling illegal lending advertisement phone numbers registered in the system every three seconds, it keeps the line busy and blocks communication between illegal lenders and citizens. Since January 2025, the system has been improved so that managers can attach photos of illegal lending advertisements via a smartphone app and instantly block phone numbers by entering them in real time. Through the Daepo Killer System, a total of approximately 27,600 calls have been blocked to date, and 8,902 phone numbers used in illegal lending advertisements have been suspended.

The Seoul Metropolitan Government will also strengthen activities to prevent illegal private lending damages, focusing on vulnerable groups and areas. The city plans to introduce various policies for young people-who are more likely to use illegal lending due to lack of financial knowledge-including case studies of damages and guidance on prevention and relief. Kim Myoungsun, Director of Fair Economy at the Seoul Metropolitan Government, said, “Financially vulnerable groups who resort to illegal private lending are often in urgent need of help. We expect that providing customized information for each group will greatly help address their difficulties, and we will continue to develop and implement various policies to protect vulnerable groups.”

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