Illegal private loans rampant, starting from legitimate loan platforms

As the economic downturn and high interest rates persist, illegal private loans targeting those in urgent need of cash are rampant. Small loans borrowed from illegal lenders disguised as legitimate companies can quickly balloon into overwhelming debts. What seemed like a lifeline becomes an inescapable noose. Tragic cases have emerged where victims, unable to cope with exorbitant interest rates, have faced family breakdowns or even been driven to extreme measures by relentless debt collection.

A woman in her 40s, interviewed by The Dong-A Ilbo Hero Content Team, borrowed 400,000 won for her child’s tuition, only to fall into the trap of illegal private loans. Her debt, compounded by weekly interest and various extension and delay fees, swelled to 15 times the principal within six weeks. Persistent harassment followed any late payments. The “emergency contact network” of family and friends who requested loan approval became shackles. She could endure threats to herself, but when the lenders mentioned her daughter’s school and class, threatening, “I will harass your daughter for the rest of her life,” she broke down.

Illegal lenders further exploit victims by luring them into their organizations with promises of debt forgiveness, forcing them to tighten the noose around new victims in the same way. When police investigations close in, these individuals are used as scapegoats, squeezing every last drop from them.

Desperate individuals often fall into illegal loans through online loan brokerage platforms. According to a Financial Supervisory Service survey, 80% of victims encountered illegal loans via these platforms. Many legitimate loan companies, used as bait, end up connecting individuals to illegal lenders. In some cases, legitimate companies sell customer contact information to illegal organizations.

The Dong-A Ilbo investigation team found that many companies operating on legal platforms were illegal. Of the 62 companies advertising, only three complied with legal interest rates and disclosed their registration numbers. Many registered addresses turned out to be for ghost companies. Despite the prevalence of these disguised illegal companies, local governments, the police, and the Financial Supervisory Service continue to take responsibility for oversight.

Illegal private loans are antisocial crimes that devastate lives, families, and society. To prevent their spread, they must be cracked down on and punished as severely as heinous crimes. Additionally, efforts must be made to diversify emergency loan options for low-credit individuals to change the environment that allows illegal loans to thrive fundamentally.