The government has increased next year's budget for the debtor representative program, created to protect victims of illegal private lending and illegal debt collection. As antisocial contracts demanding interest of several thousand percent a year and illegal collection such as threats and sexual exploitation increase, demand for debtor representatives is growing, but budgets and staffing remain inadequate.
Introduced in 2020, the debtor representative system is a free legal service for victims of illegal collection. Once a debtor representative is designated, a collector can contact and collect only through the representative. Debtors can escape the pain of illegal collection that involves relentless calls day and night filled with insults and threats, and they can receive free support for lawsuits to invalidate antisocial illegal contracts.
According to the 2026 budget proposal analysis published on the 5th by the National Assembly Budget Office, the Financial Services Commission (FSC) allocated 1.906 billion won for the debtor representative support program. That is up 22.3% from this year's 1.559 billion won.
Applications for the debtor representative system have been rising rapidly since April. The number of applications totaled 1,343 from January to March, maintaining a monthly average of about 450, but it jumped to 755 in April. Cumulative applications through June reached 3,897, roughly matching last year's annual total of 3,096.
Since April, the Financial Services Commission (FSC) has shortened the time to transfer cases from the Financial Supervisory Service to the Korea Legal Aid Corporation after intake, and simplified application procedures and requirements. Previously, applicants had to know the illegal private lender's phone number, but now a KakaoTalk ID is enough. The application channels were also expanded to include the integrated support centers for inclusive finance within the Korea Inclusive Finance Agency (KINFA).
The Financial Services Commission (FSC) expects the number of debtor representative support cases this year to reach 7,200, about double last year's level. An FSC official said, "Since the amended Lending Business Act took effect in July, reports and consultations regarding illegal private lending damage have increased by about 33%," and noted, "Applications for the debtor representative system are expected to continue rising."
Still, critics say the benefits debtors receive are minimal compared with the growing number of applications. Due to a lack of personnel, many representatives end up merely answering illegal collection calls on behalf of debtors, falling short of leading to proactive legal remedies. According to data the Financial Supervisory Service (FSS) submitted to the office of Democratic Party of Korea lawmaker Lee In-young, as of the end of June this year, only 43 cases, or 1.1% of the total, proceeded to lawsuits after applications for debtor representatives.
In the financial sector, some argue the qualifications for debtor representatives should be expanded from lawyers to third parties such as civic groups. This was also a campaign pledge by President Lee Jae-myung when he was a presidential candidate. A financial industry official said, "It is difficult to use the FSC budget to fund more lawyer positions at the Korea Legal Aid Corporation under the Ministry of Justice, and the budget is constrained, so we need to explore ways to broaden eligibility for representatives."