Young borrowers in need of small sums targeted by loan sharks

The Korea Times

The Korea Times

Finance

Tue, October 3, 2023 | 15:28

Economy

Young borrowers in need of small sums targeted by loan sharks

Posted : 2023-02-14 15:43

Updated : 2023-02-15 16:21

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By Yi Whan-woo

People in their 20s and even teenagers who want to borrow a small amount of money on credit are being targeted by loan sharks while banks and other licensed lenders would refuse to lend the money considered too tiny to be taken out through standard loans.

What is more of a concern is that victims of loan sharks tend to go unnoticed by law enforcement as the money they are charged is seen as petty compared to that involved in larger-scale financial crimes.

According to Financial Supervisory Service (FSS) data submitted to the National Assembly, Tuesday, more than 120,000 cases were reported last year on crimes targeting financially vulnerable people.

The crimes involved predatory lending practices, illegal debt collection and unauthorized money lending advertisements.

Many victims were teenagers and university students in their 20s who do not have jobs, and in addition to their pocket money, needed more cash for their leisure activities such as attending concerts and playing online games.

"The loan sharks would lure victims with an advertisement that money will be available for borrowing regardless of their credit scores," the FSS said, "The victims would borrow 100,000 won ($78) or less, and then, will be forced to return the principal plus an extra 30,000 won as interest within 48 hours."

The FSS added that the interest rate would go up "far too excessively" each day after the payment deadline.

An illegal money lender, according to the FSS, lent a total of 170 million won to 580 victims who contacted him between January 2020 and September 2022. The money each victim borrowed ranged between 10,000 won and 100,000 won and some of them were charged with an interest rate of up to 5,475 percent as a late payment penalty and commission, among other means of illegal money collection.

"Such lending practices are banned under the law," the FSS said, noting the maximum legal interest rate is 20 percent. "The money that the victims were asked to pay may not seem large for well-paid salaried workers, but considering the financial conditions of the victims, their financial distress must be extreme and it should not be overlooked."

The FSS said relevant financial authorities plan to take joint response measures this year to root out illegal money lending and protect financially vulnerable people. A possible measure would include a massive public information campaign.

yistory@koreatimes.co.kr