A one-stop service will be introduced in which, if an illegal private lending victim files a single report with a victim report center, necessary measures such as halting illegal collections, blocking phone numbers and mule accounts, and requesting a police investigation proceed at the same time. Authorities are also pursuing a plan to require mandatory registration with the financial authorities when attempting to purchase and collect rental claims for home appliances and other items.
Chairperson Lee Eog-weon of the Financial Services Commission (FSC) held an on-site meeting to eradicate illegal private lending at the Seoul Financial Welfare Counseling Center's central office in Dongjak District, Seoul, on the 9th, and announced measures to stamp out illegal private lending. Lee said, "The government will build a one-stop victim reporting and support system that stays by victims' side and supports them until their damages from illegal private lending are restored," adding, "From the victim's standpoint, we will assist the entire process through damage reporting, stopping illegal collections, blocking phone numbers and mule accounts, free appointment of a debtor representative, police investigations, and unjust enrichment return lawsuits until their damages are recovered."
The financial authorities will introduce a one-stop victim reporting system to eradicate illegal private lending. When a victim of illegal private lending reports to a victim report center, related procedures such as a police investigation, blocking phone numbers and mule accounts, and unjust enrichment return lawsuits proceed at once.
Victims of illegal private lending will prepare a damage report with a dedicated officer at the Integrated Support Center for People's Finance (Shinbokwi) and file it with the Financial Supervisory Service. The Financial Supervisory Service takes initial measures to halt illegal collections and requests a police investigation, while simultaneously proceeding with blocking each illegal tool and requesting the Korea Legal Aid Corporation to appoint a debtor representative. Upon receiving the police investigation results, it will request the Korea Legal Aid Corporation to seek legal relief, including lawsuits for damages and unjust enrichment returns.
Taking into account the time required to overhaul the Financial Supervisory Service's online system, the one-stop victim reporting system will begin offline in January next year, alongside the Integrated Support Center for People's Finance's dedicated victim system.
Starting in the first quarter of next year, the Financial Supervisory Service governor will issue certificates confirming the invalidity of antisocial lending contracts. The government will also push to amend the Lending Business Act to enable blocking of social networking service (SNS) accounts and posts used as illegal collection tools, phone numbers used to access SNS, other financial company accounts held by the owners of accounts suspected to be mule accounts for illegal collections, and accounts receiving criminal proceeds.
A plan is also being pursued to require registration with the financial authorities to collect rental claims arising from overdue rental fees for home appliances such as water purifiers and refrigerators. Rental claims are currently excluded from the scope of the Lending Business Act, so once transferred to a third party, anyone could collect them without regulation. The Korea Credit Information Services will provide information so consumers can check details of purchases of rental claims subject to collection.
A basis will also be established to immediately block accounts used for illegal private lending. If a victim reports to the Financial Supervisory Service, or if the Financial Supervisory Service becomes aware of an account used for illegal private lending through tips, the account must undergo financial companies' enhanced customer due diligence. If customer verification is not possible, the account will be closed immediately.
In addition to accounts directly used for illegal collections, a plan will also be pursued to freeze other financial company accounts held by the same account holder that are highly likely to be mule accounts, as well as pooling accounts to which criminal proceeds were transferred.
The interest rate on illegal private lending prevention loans will be cut by 3.4 percentage points, from the current 15.9% per year to 12.5% per year. When the entire loan is repaid, 50% of the interest paid will be given back as a payback. Through this, the government intends to encourage faithful repayment while lowering the effective interest burden to 6.3% per year.
Illegal private lending prevention loans are small loans of 1 million won or less provided so that those in arrears or without income, who have difficulty accessing institutional finance, do not resort to illegal private lending.
President Lee Jae-myung noted at a Cabinet meeting on Sept. that the interest rate on illegal private lending prevention loans is 15.9%, saying it was "too cruel."