Seoul cracks down on illegal 'gift card loan' schemes charging thousands of percent interest

The Seoul Metropolitan Government's Civil Justice Police Bureau announced Sunday it will conduct intensive investigations and crackdowns on illegal shadow lending disguised as gift card transactions through the end of this month.

The bureau said the campaign targets a variant of illegal private lending known as "gift card loans," which has been spreading rapidly and raising growing concerns about financial harm to borrowers.

The scheme offers small emergency loans under the guise of gift card sales, then demands repayment in the form of higher-value gift cards — effectively charging annual interest rates of up to several thousand percent.

A bureau official said the criminal harm from such schemes is growing, citing the case of a woman in her 30s found dead in a Seoul motel in May who was believed to have used gift card loans. The woman was reportedly subjected to verbal abuse and threats related to loan repayment.

Threatening borrowers with criminal complaints over delayed repayment, or repeatedly calling and texting their family members and acquaintances, may constitute illegal debt collection.

The bureau has organized three investigation units, each assigned to specific zones by district, and will intensively monitor illegal lending advertisements posted on online forums and SNS platforms.

It plans to pursue tip-offs, gather intelligence and conduct on-site investigations simultaneously, focusing on unregistered lending operations and those charging above the legal maximum annual interest rate of 20 percent.

Phone numbers used in illegal lending will be immediately blocked using the bureau's "Burner Phone Killer" system, which repeatedly dials those numbers to make them difficult to connect, disrupting illegal business activity.

The bureau will also produce and distribute short-form videos featuring Seoul's mascot Haechi to help protect vulnerable groups — including youth, low-credit borrowers and self-employed individuals — from falling victim to such schemes.

The videos will explain in accessible terms the dangers of illegal shadow lending disguised as gift card pre-sales, along with real cases of harm and how to respond, to raise public awareness.

Residents who have been harmed by gift card loan schemes or who discover related illegal activity can report it through the "Eungdapso Livelihood Crime Reporting Center" on the Seoul Metropolitan Government website or by calling the bureau's Economic Investigation Division. Whistleblowers may receive a reward of up to 200 million won ($139,000) following a review.

Lee Chang-seok, director of the Civil Justice Police Bureau, said the bureau would strengthen investigations into illegal private lending organizations while doing its utmost to protect victims and prevent further harm.