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๐Ÿ‡ฐ๐Ÿ‡ท South Korea /Crime & Justice

South Korea Targets Predatory 'Gift Certificate Loans' with 2,000% Annual Interest

From Hankyoreh · () Korean

Translated from Korean and summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources Context piece
  • South Korean financial authorities are cracking down on a predatory lending scheme involving "gift certificate" loans, which can carry exorbitant interest rates equivalent to 2,000% annually.
  • This practice, where individuals borrow cash and repay with gift certificates at a higher value, has led to severe debt spirals and even a recent death.
  • The Financial Services Commission chairman declared these loans illegal and unenforceable, urging victims to report them through a one-stop support system.

South Korea's financial authorities are taking a firm stance against a dangerous new form of illegal private lending that preys on vulnerable individuals desperate for quick cash. Dubbed 'gift certificate ์‚ฌ์ฑ„' (gift certificate private loans), this scheme involves lending cash and demanding repayment in the form of gift certificates valued significantly higher than the original loan, effectively creating astronomical interest rates.

This is fundamentally void and does not need to be repaid. We will respond with a zero-tolerance principle against variant crimes like gift certificate advance sales.

· Lee Bok-hyunChairman of the Financial Services Commission declaring the illegality of gift certificate loans.

This predatory practice has recently come under intense scrutiny following the tragic death of a woman in her 30s who was reportedly harassed and threatened by lenders after falling victim to the scheme. The loans, which can equate to an annual interest rate exceeding 2,000%, trap borrowers in a cycle of debt, often forcing them to take out further loans to cover the inflated gift certificate repayments.

Financial Services Commission Chairman Lee Bok-hyun has unequivocally condemned these transactions, stating they are "fundamentally void and do not need to be repaid." He emphasized a "zero-tolerance" approach, classifying the practice as an anti-social, ultra-high-interest loan exceeding the legal limit of 60% annual interest, which renders both principal and interest invalid under the revised Loan Business Act.

Gift certificate advance sales are essentially illegal private lending. As they correspond to anti-social ultra-high-interest loans exceeding an annual rate of 60%, they are fundamentally void. There is no need to repay them, and if you are experiencing damage, report it to the online one-stop support system, and it will be processed immediately.

· Lee Bok-hyunExplaining the legal basis for invalidating the loans.

Authorities are urging victims to utilize the 'online one-stop support system' for immediate assistance, which includes halting illegal collection activities, referring cases for investigation, and providing victim relief. President Yoon Suk-yeol has also publicly denounced the practice as 'cruel,' particularly noting its impact on young people, and has called for strict enforcement. The crackdown aims to dismantle this exploitative system and protect citizens from its devastating consequences.

It is a cruel act. Mainly young people are victims. Please crack down on it.

· Yoon Suk-yeolPresident Yoon Suk-yeol's directive regarding the crackdown on gift certificate loans.
About this summary

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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