SNS loans carry interest rates above 4,000% annually, with threats to expose borrowers to family and friends
Nationwide crackdown runs through April; tipsters can receive up to 125 million won in rewards
A construction day laborer in his 30s, identified only as H, took out an initial 200,000 won ($150) from an illegal lender through an SNS open chat room after a leg injury forced him to stop working. Over three months, repeated borrowing and repayments pushed his total loans to 14.5 million won, while the amount already repaid reached 28 million won. The annualized interest rates applied by the lenders were 4,149 percent and 3,678 percent, respectively. When H could no longer keep up with payments, the lenders threatened to expose the debt to family and acquaintances using photos and contact information collected at the time of the loans. The Financial Services Commission disclosed the case this year as an example of illegal lending harm.
The Korean National Police Agency's National Investigation Headquarters announced Sunday that it will conduct a nationwide special crackdown on illegal private lending from Monday through April 30 next year — a six-month operation. A special voluntary-surrender and reporting period will run through the end of this year. Informants and tipsters whose contributions lead to arrests can receive rewards of up to 125 million won.
The main targets of the crackdown are unlicensed lending operations, collection of interest exceeding the legal ceiling of 20 percent per year, and illegal debt collection. Police will also focus on new and variant loan schemes that use gift vouchers and virtual assets.
Gift-voucher loans can appear on the surface to be ordinary sales transactions but in practice function as high-interest loans. Police arrested a lender in Busan who disguised the scheme as a pre-sale of gift vouchers — lending 350,000 won and collecting 500,000 won worth of mobile gift vouchers ten days later. More than 300 victims were identified, with total loans of about 280 million won, equivalent to an annualized interest rate of 1,564.3 percent.
Illegal lending harm continues to grow online. From January through September this year, police recorded 4,405 cases — a 5.3 percent increase from the same period last year. Arrests also rose to 2,438 cases, up from 2,373 in the same period a year earlier. During a previous special crackdown that ran from November last year through April this year, police uncovered 1,284 cases and arrested 1,553 people, 51 of whom were detained. Arrests during that period were up 37.5 percent from the same period the year before.
Police will set up dedicated teams within anti-corruption and economic crime investigation units and wide-area crime investigation units at provincial and metropolitan police agencies to focus on organized offenses and new methods. The agency also plans to strengthen victim protection, centering on 159 dedicated investigators assigned to 105 police stations nationwide in July.
Victims who were coerced through illegal debt collection into lending their bank accounts or SIM cards — and thereby became unwitting participants in crime — will be encouraged to come forward, with the possibility of reduced penalties. Depending on the circumstances of their involvement, their financial situation and the extent of their participation, cases may be reviewed by a minor-offense screening committee, which can result in a warning or a reduced sentence in summary proceedings. Those who turn themselves in before the end of this year may also have their punishment reduced or waived through consultations with relevant agencies.
Voluntary surrenders, reports and tips can be submitted by calling 112 or visiting any police station nationwide. Hong Seok-gi, head of the National Investigation Headquarters, said the agency would "root out the criminal ecosystem of illegal private lending and pursue and strip away criminal proceeds to the very end."
attom@heraldcorp.com
