Legislation on illegal loan sharks urgently needed

The ruling and opposition parties are united in their push for a bill that would significantly strengthen registration requirements for lenders and allow the victim to recover even the principal amount of illegal loans. This collaborative effort is a beacon of hope in the fight against illegal loans, and it's encouraging to see both sides working together to protect the public.

The main opposition Democratic Party plans to propose a bill this week to amend the Loan Act to raise the minimum equity capital requirement for lenders to register from 10 million won (7,320 U.S. dollars) to 300 million won (220,000 dollars) and to nullify all contracts with illegal lenders. This will open the way for victims of illegal loans to recover not only the interest but also the principal through civil lawsuits. The ruling People's Power Party is also preparing a bill that would require financial authorities to intensively supervise loan brokerage platforms and block ads for illegal loans online.

The reality of platform loan sharking, as exposed by the Hero Content Team of The Dong-A Ilbo this June, is nothing short of shocking. Victims who visited online platforms to borrow money from legitimate lenders unknowingly fell into the trap of illegal loan sharks. The platforms were unable to separate illegal lenders posing as legitimate businesses from legal lenders. The scale of this problem is alarming, and it's crucial that we take immediate action to protect potential victims.

With lax monitoring and punishment, Korea has become a country where anyone can become an illegal loan shark. All you need to do is prove that you have 10 million won (7,320 dollars) in your bank account, take an 18-hour class, and set up a paper office, and you have a lender business license. It is so easy to make money from illegal loans, and even if one gets caught the losses are small. The authorities enable the victim to recover only the interest exceeding the statutory interest rate of 20 percent per year. The state thus effectively guarantees the criminals the principal and interest.

Japan, a country that was once heavily affected by loan sharking, has consistently promoted measures such as raising the threshold for loan sharking and forfeiting the principal of loan sharks since 2006, and the number of loan sharks has decreased to one-seventh during a 20-year period. Korea should also legislate such a law as soon as possible to prevent and rescue victims from payday loans. Last year, there were 63,283 reports and counseling cases of illegal private finance, and it is almost impossible to estimate the severity of the unreported damage. The 'money trap' that seeks to prey on the financial desperateness of working-class people is stretching out like a spider web even at this very moment.