Borrowed W2m, owed 4 million: Korea launches one-stop reporting for illegal lending victims

A woman in her 40s, identified only as A, was raising a middle school-age child alone after a divorce when job loss and a failed business left her scrambling for living expenses. She turned to online loan advertisements and, from July onward, borrowed from five illegal private lenders — receiving 2 million won ($1,450) in actual funds while her contracts required her to repay 4 million won, an effective annual interest rate of roughly 3,500 percent. After repaying 1.5 million won, she continued to face collection pressure and sought help from the Credit Recovery Commission on Aug. 12. The commission then arranged a debt representative, issued a certificate voiding her loan contracts, froze the bank accounts used in the crime and filed for debt adjustment on her legitimate card debt.

Going forward, victims of illegal private lending will no longer need to visit multiple agencies. A single online report will let them request a halt to illegal debt collection, appoint a debt representative and seek a criminal investigation all at once. Those who have already reported to police will be connected to the Credit Recovery Commission for support ranging from case monitoring to damage recovery lawsuits.

The Financial Services Commission announced Friday that it had finalized the "one-stop support improvement plan for illegal private lending" at a subcommittee meeting of its inclusive finance task force held Thursday. The updated system takes effect Monday. The revisions focus on reducing the inconveniences that emerged in practice since the original one-stop support framework launched in March.

The most significant change is a new "one-stop illegal lending damage report" portal on the Financial Supervisory Service website. Previously, victims filing online had to submit separate applications for each remedy they needed — criminal referrals, debt representative appointments, loan contract voiding certificates, phone number and social media account suspensions and more — and had to re-enter the same creditor information and loan and repayment details each time.

Under the new system, victims enter their information once and then select all the remedies they need in a single submission. Suspending phone numbers and social media accounts used for illegal collection, obtaining a free debt representative, voiding loan contracts, receiving litigation support and requesting a criminal investigation are all bundled into one reporting process. Separate channels for reporting illegal lending advertisements and public tips related to phone numbers and social media will be maintained.

The process for victims who have already reported to police is also changing. Previously, even after notifying police, a victim still had to personally book a Credit Recovery Commission consultation and travel to a community finance support center to access one-stop services.

Now, the investigating officer will confirm whether the victim wishes to use the service and guide them through a QR code on the spot to register for a Credit Recovery Commission consultation. If the victim grants authorization, the commission will act as their complaint representative — reviewing and copying investigation materials, submitting additional documents, monitoring case progress and receiving notifications of outcomes on their behalf.

In cases where an investigation identifies the illegal lender, the Credit Recovery Commission will coordinate with the Korea Legal Aid Corporation to pursue damage recovery litigation — including suits to void loan contracts, recover unjust enrichment or claim damages — without the victim having to manage any follow-up steps independently.

Use of the one-stop support service has been growing rapidly. From Feb. 23 through Aug. 21, 821 people received consultations at community finance support centers, and 656 of them reported a combined 4,705 cases of illegal private lending victimization.

Credit Recovery Commission case workers demanded that illegal lenders halt collection and close out debts in 3,421 cases, and 645 of those resulted in debt settlement agreements. The Financial Supervisory Service issued 154 loan contract voiding certificates and referred 895 illegal lenders with specifically identified criminal charges to police for investigation.

A distinction must be drawn, however, between the online portal opening Monday and a fully online one-stop service. Starting Monday, victims can file damage reports and apply for multiple remedies simultaneously on the FSS website, but a fully online one-stop service — in which a dedicated Credit Recovery Commission case worker handles all follow-up steps by phone and text message, with no center visit required — is scheduled to launch in October.

The government said it will continue to provide in-person support through dedicated staff at 22 community finance support centers nationwide while monitoring the operation of the system on an ongoing basis.