Predatory financial and debt practices in South Korea

Issues regarding predatory financial practices and debt management have emerged in South Korea.

A South Korean court sentenced a moneylender, identified as Kim, to 3 years and 6 months in prison for operating an unregistered lending business. Between July and November 2024, Kim applied interest rates between 1,233% and 6,083% per annum and used abusive language and threats against debtors and their families. These practices were linked to the suicide of a single mother in September 2024. The appellate court at the Seoul Northern District Court reduced the original 4-year sentence following settlements with victims and ordered the seizure of approximately 7.7 million won in criminal profits.

Separately, reports have surfaced regarding law firms using deceptive advertising on social media platforms to target vulnerable debtors. These firms allegedly claim they can forgive up to 95% of debt, a figure legal experts describe as “highly misleading and rare.” Victims have reported being pressured into high-cost contracts, with fees reaching 6 to 7 million won, and some firms have reportedly encouraged debtors to take on more debt to cover legal costs. The Credit Recovery Committee has advised citizens to utilize public debt adjustment institutions, which offer services for significantly lower fees.

Illegal private lending is reportedly becoming more sophisticated, with lenders using malicious applications to access contact lists and threatening victims with social defamation or false accusations of sexual crimes. Additionally, voice phishing scams remain a concern; in one instance, the Incheon District Court acquitted a man charged with delivering phishing proceeds, ruling he likely mistook criminal instructions for a legitimate ‘work loan’ process. In response, the National Investigation Headquarters has scheduled a nationwide special crackdown through next October.