South Korea's Financial Supervisory Service warns of illegal vehicle‑collateral loans with interest up to 229%

The Financial Supervisory Service (FSS) issued a consumer alert about a variant of illegal private lending that uses installment or lease vehicles as collateral. Lenders seize the vehicle, then charge parking fees, travel expenses, and other surcharges, resulting in effective annual interest rates ranging from 27% to a maximum of 229%. From January to June 2024, the FSS recorded 12 complaints, with the number of reports rising each month.

Loan amounts ranged from 2.5 million won to 30 million won. Victims spanned all adult age groups, most commonly in their 30s, and were concentrated in the capital region but also included cases in Daegu, Gyeongnam and Gwangju. The FSS warned that any fees demanded by a lender, regardless of label, are considered interest; registered lenders may not charge more than the statutory 20% annual rate, and any rate above 60% renders both principal and interest void. Borrowers who illegally provide a vehicle as collateral may face criminal prosecution, and the agency is assisting affected borrowers with redress measures.