[Shot!] "You Can Borrow Money and Not Pay It Back?"

"We help those who have run away from home or need regular pocket money."

This is an ad for a "private cash emergency loan" posted on X on the 16th.

Illegal private lending is extending its clutches to university students, soldiers, and even teenagers via social media.

Amid a mix of online gambling, a stock investment craze fueled by FOMO (fear of missing out), and financial hardship, young people who have not even entered society yet are falling into the trap of illegal private lending.

Jung Wan, professor emeritus at Kyung Hee University Law School, pointed out, "The spread of illegal private lending through social media is a serious social problem that can destroy the economic and social foundation of young people," adding, "In particular, young people who lack financial experience often fail to properly recognize the risks of contracts, so there is a very high possibility that the damage will be prolonged."


"Minors born in 2010, soldiers eligible for loans" solicitation

As of the 25th, on social media, ads for illegal loans targeting teenagers and soldiers can easily be seen, such as "Minors, (loans) available from those born in 2010. Living expenses, gambling funds, entertainment funds all ok." (X) and "Where would minors or soldiers get money? We don't ask you to pay it back and give you money instead? If you're curious, come in for a consultation" (Threads).

They try to build "trust" by posting screenshots of records of money actually deposited and KakaoTalk message reviews from people who borrowed money.

When we sought a loan consultation through the LINE app from the 16th to the 23rd, the consultants commonly required a name, address, and contact number along with the name of one's workplace, salary amount and payday, existing loan and delinquency history, and whether one's mobile phone service was suspended.

Among them, the consultant of Account A, which posted the phrase "Even minors born in 2010 can get a loan," explained, "If you borrow 200,000 won, you must pay back 400,000 won a week later."

He then said, "Just try borrowing 100,000 won first," and even made the incomprehensible, absurd statement, "You can borrow money and not pay it back."

When asked what that meant, the consultant, who called himself the "manager of a relay room (loan consultation chat room)," replied, "It means that even if you can't pay back the money, there will absolutely be no harassment such as illegal debt collection, so you don't need to be afraid."

When we still hesitated over the loan, he again pressured us, saying, "If you get over-inquired (receiving loan consultations multiple times), there may be disadvantages to your limit or approval."

Also, when we asked Account B, "I was born in 2009, is a loan possible?" they offered a 1 million won loan with 800,000 won in interest. They also demanded an acquaintance's contact number as a guarantee.

In response to the inquiry "I'm a soldier, is a loan possible?" the consultant of Account C demanded 500,000 won in interest for 1 million won, and the consultant of Account D demanded 1.8 million won in interest for lending 2 million won for one week. Both Accounts C and D made identity verification via video call mandatory.

On the 21st, the Korea Consumer Credit Finance Association announced that, as a result of its "on-line illegal private lending advertisement inspection" conducted for two months from April, it caught a total of 7,855 illegal advertisements from 280 companies presumed to be illegal private lenders.

This is an increase of 2,563 cases (+48%) compared to last year (5,292 cases), and the association said that online illegal private lending advertisements are expanding. Of all the advertisements caught, 77.7% were social media (YouTube, Facebook, Instagram, etc.) ads.

In addition, according to the Financial Services Commission in April, 86% of the victims who visited the Comprehensive Support Center for Working-Class Finance were found to have used illegal private lending through online channels (social media, loan brokerage sites).

An official of the Financial Supervisory Service's Public Livelihood Infringement Response Team said, "In the past, illegal private lending was mainly conducted through phone calls and the like, but these days, as social media has developed, cases have increased in which loan ads are posted on social media or funds are received after actually exchanging conversations."

Daeryun LLC Attorney Lee Moon-yong warned, "Information such as the name of one's workplace, payday, and place of residence is highly likely to be used later for illegal debt collection," adding, "The payday can be used to set the timing of collection, workplace information can be used for pressure through workplace visits or contact, and the contact numbers of family and acquaintances can be used for indirect pressure through third parties."

"Financial failure in youth delays economic independence and entrenches poverty"

Online, posts related to "private cash emergency loans" for soldiers and minors continue.

On the 13th, on the Q&A platform "Aha," a user who identified themselves as a minor asked, "I urgently need about 100,000 won right now. Are the small emergency loans on Twitter real? There are posts saying minors can get private money too, and I need money so urgently that I have to earn it somehow right now. Would it be okay?"

On the 4th of last month, on the legal consultation platform "Lawtalk," a user who identified themselves as an active-duty soldier posted, "During the loan process, an acquaintance's contact number was passed to the operator, and when repayment was delayed, the acquaintance received threatening texts."

The military is also taking soldiers' gambling and loan problems seriously. This is because, as a private's monthly pay exceeds 700,000 won and a sergeant's monthly pay has reached 1.5 million won, more soldiers are falling into illegal loans while engaging in online gambling and stock investment.

Mr. Kim (20), who enlisted as an active-duty Army soldier in January, said, "The military often provides financial education emphasizing not to gamble and not to lend money to other soldiers," adding, "Even though soldiers' pay has risen, there are more cases of people leaving the service tens of millions of won in debt, which is said to be a problem."

Under current law, the maximum interest rate for a monetary loan contract is 20% per year. However, the interest rates demanded by "private cash emergency loan" consultants exceed the legal maximum interest rate by 90 to 180 times.

According to the Financial Services Commission's announcement in October last year, in the two months immediately after the enforcement of the revised Credit Business Act, reports and consultations on illegal private lending damage numbered 3,652 cases, a 33.1% increase compared to the two months before enforcement (2,744 cases).

Professor Emeritus Jung pointed out, "Illegal private loans, with ultra-high interest rates and illegal fees, rapidly inflate the principal, trapping borrowers in a vicious cycle of debt known as 'robbing Peter to pay Paul,'" adding, "Financial failure that occurs in youth delays economic independence and entrenches poverty, ultimately leading to social costs that deepen youth poverty and financial exclusion."

Under the revised Credit Business Act and its regulations, illegal loan contracts exceeding 60% per year may have both principal and interest treated as void, unregistered lending is punishable by imprisonment of up to 10 years, and violation of the maximum interest rate by imprisonment of up to 5 years.

An official of the Financial Supervisory Service's Public Livelihood Infringement Response Team explained, "If you capture and report social media ads, conversations, and deposit/withdrawal records, we determine whether it is illegal private lending and connect you to a customized relief system," adding, "We are also operating a one-stop damage relief that supports everything from issuing a certificate of nullity to appointing a debtor's agent."

Professor Emeritus Jung suggested, "As illegal private lending has evolved into social media and overseas messengers, the response must also be comprehensive," adding, "Along with blocking illegal ads on platforms, preemptive investigation by the authorities, and strengthening financial education in schools, we must further expand a one-stop damage relief system that connects everything from reporting to halting illegal debt collection."

[Read Full Article]
Yonhap News - [Shot!] "You Can Borrow Money and Not Pay It Back?"
 (Go to Link)
SBS - "You Can Borrow Money and Not Pay It Back?"... Illegal Loan Ads on Social Media Surge (Go to Link)