South Korea Expands Support for Illegal Lending Victims
South Korea is expanding its support system for victims of illegal private lending by introducing a single reporting channel designed to connect borrowers with multiple forms of assistance through one application.
Beginning Aug. 31, victims can use the Financial Supervisory Service website to submit information about their case once and request several remedies at the same time. Available options include assistance with stopping illegal debt collection, appointing a debtor’s representative, obtaining confirmation that a loan contract is invalid, suspending phone numbers or social media accounts associated with illegal activity, and requesting a police investigation.
The changes were announced by South Korea’s Financial Services Commission following an Aug. 28 meeting of the illegal private finance response subcommittee. The measures build on the country’s one-stop support program launched earlier this year and are intended to make it easier for victims to access financial, legal, and investigative assistance.
Reporting Process Consolidates Multiple Requests
Under the previous system, borrowers seeking help online generally had to complete separate applications for different forms of relief. That process could require victims to repeatedly provide the same lender information, loan details, repayment history, and supporting evidence.
The new “One-Stop Illegal Private Finance Victim Reporting” channel consolidates those requests into one process. After entering details about the case, victims can select the types of assistance they need and submit the requests together.
Separate reporting channels will remain available for illegal loan advertisements and reports involving phone numbers or social media accounts because authorities receive a high volume of tips in those categories.
The government is also changing how victims are connected to assistance after filing a police report. Investigators will be able to ask victims during the statement process whether they want additional support. Those who agree can access an application for the Credit Counseling and Recovery Service through a QR code while at the police station.
CCRS Role Expands Into Legal Support
The Credit Counseling and Recovery Service will take on a broader role under the revised system.
With authorization from a victim, CCRS may serve as a complaint proxy and assign a caseworker to assist throughout the investigative process. Assistance can include obtaining investigative records, providing supplemental materials, tracking the progress of an investigation, and receiving notifications about the outcome.
When authorities identify an illegal lender, CCRS can also coordinate with the Korea Legal Aid Corporation to pursue civil remedies. Potential actions include seeking confirmation that a loan agreement is invalid, recovering improperly collected money, and pursuing damages.
The expanded process is intended to reduce situations in which victims report illegal activity but fail to obtain additional financial or legal assistance because they must separately contact another agency.
Cases Highlight Extreme Interest and Collection Practices
Financial authorities have also highlighted cases involving unusually high interest rates and aggressive collection practices.
In one case, a woman experiencing financial hardship reportedly received 2 million won from five illegal lenders but was required to repay 4 million won. Authorities calculated the annualized interest rate at approximately 3,500%.
After collection activity continued, CCRS helped request debtor representation, loan contract invalidity certificates, and freezes involving accounts connected with the lenders. The victim was also connected with additional debt adjustment and counseling resources.
Another case involved a minor who borrowed 350,000 won through Telegram under agreements requiring repayment of twice the borrowed amounts within one week. Authorities calculated an annualized interest rate of approximately 5,214%.
After the borrower failed to repay, the lender allegedly distributed photographs and loan documents to other individuals. The case was ultimately referred for additional investigation and victim assistance.
Hundreds of Victims Have Used the Program
Government figures show substantial use of the one-stop system during its first several months.
Between Feb. 23 and Aug. 21, 821 victims received counseling and 656 filed reports covering 4,705 instances of alleged harm. CCRS caseworkers intervened in 3,421 illegal debt cases, demanding that lenders stop unlawful collection activity and terminate the debts.
Those efforts resulted in agreements to terminate 645 debts. Authorities also issued 154 loan contract invalidity certificates and referred 895 individuals connected with alleged illegal lending activity for police investigation.
Another 123 victims were connected with services including debt adjustment, policy-based financial assistance, employment support, and welfare programs.
Remote Assistance Planned for October
Victims can submit reports online and may include evidence such as text messages, KakaoTalk conversations, banking records, recordings, phone numbers, and social media account information. Authorities said assistance may still be requested when some supporting documentation is unavailable.
In-person help is also available through Integrated Support Centers for Microfinance, which expanded from eight to 22 dedicated locations in August.
A further expansion is planned for October, when victims will be able to work with an assigned CCRS caseworker remotely through phone and text communications. The service is intended to provide access to the same reporting and relief process without requiring a visit to a support center.
All counseling and victim-relief services provided through the one-stop program are offered without charge.
