The Supreme Court has ruled that authorities can confiscate the full amount of excess interest from illegal loan sharks even if they returned interest received above the statutory rate to victims.
The Supreme Court's Division 2 (Presiding Justice Oh Kyung-mi) on the 5th finalized the lower court ruling that sentenced a defendant, identified only as A, to four months in prison, suspended for one year, and ordered the forfeiture of 47.65 million won, in a case on charges including violating the Act on Registration of Credit Business, etc. and Protection of Finance Users.
From November 2018 to July 2019, A lent about 34 million won to a debtor in five installments and received 82.5 million won in combined principal and interest. The interest rate was about 324% per year. The statutory maximum rate at the time was 24% per year. The amount of interest A received above the statutory cap was about 47.65 million won.
In addition, to hinder tracing of funds, A received 237.86 million won via a bank account under a borrowed name in 97 transfers from Aug. 2017 to Oct. 2020.
During the first trial, A returned about 55 million won to the debtor and reached a settlement. A's side argued that confiscation was unjust because all excess interest had been returned and no crime revenue was retained.
However, the first-instance court sentenced A to four months in prison, suspended for one year, and ordered the forfeiture of 47.65 million won in excess interest. A appealed, but the appellate court dismissed the appeal.
The appellate court said, "Interest received by an unregistered lender above the statutory interest rate is property obtained in violation of the Act on Registration of Credit Business, etc., and constitutes 'property derived from a criminal act' as defined in the Act on Regulation and Punishment of Criminal Proceeds Concealment."
It continued, "A appears to have received interest from debtors through a bank account under a borrowed name and then withdrawn it in cash from an ATM, concealing or spending most of it," adding, "It cannot be viewed that returning excess interest to victims as settlement money or repayment excludes it from confiscation."
The Supreme Court dismissed A's final appeal. A Supreme Court official said the ruling "confirmed that even if all excess interest received in violation of the Act on Registration of Credit Business, etc. is returned, it was acquired as criminal proceeds and is therefore subject to confiscation under the Act on Regulation and Punishment of Criminal Proceeds Concealment."