Suspects under arrest (Image courtesy of Yonhap)
SUWON, Nov. 19 (Korea Bizwire) — South Korean police have broken up a large network of illegal private lenders that preyed on low-income borrowers with usurious interest rates and aggressive collection tactics, authorities said Wednesday.
The Gyeonggi Nambu Provincial Police Agency announced it had arrested 61 people connected to four criminal lending rings, including the alleged ringleader, a man in his 30s identified as A. Eighteen of them have been formally detained and referred to prosecutors.
According to investigators, the groups operated unregistered lending offices across the Seoul metropolitan area from early 2021 through September 2024, extending small, fast loans to financially vulnerable borrowers and ultimately collecting an estimated 67.9 billion won (US$50 million) through illegal high-interest lending and coercive debt collection.
The loans were typically small—ranging from 270,000 won to 1.9 million won—but came with repayment windows of less than a week and astronomical interest rates. Police cited one example in which a borrower who took out 270,000 won was required to repay 500,000 won within seven days, an annualized interest rate of 4,442 percent. If repaid the following day, the effective annual rate soared above 31,000 percent.
When borrowers struggled to make payments, investigators said, the lenders sent associates posing as employees of other loan companies to pressure victims into taking out larger loans, trapping them in cycles of debt. One victim who borrowed 970,000 won ultimately paid 57 million won in interest alone over 11 months.
Bundles of cash seized as evidence by police (provided by Gyeonggi Nambu Provincial Police Agency).
Police said the lenders routinely obtained family and friends’ contact information as collateral, then used threats to disclose borrowers’ debts to force repayment. In some cases, the groups seized victims’ bank accounts and converted them into shell accounts for other criminal activity.
The crackdown began after the Gyeonggi Welfare Foundation flagged suspicious activity late last year. Police have since moved to freeze 24 billion won in criminal proceeds, and secured court orders blocking the disposal of 14 billion won in assets, including real estate, foreign luxury cars, and high-end watches.
Investigators said the structure and hierarchy of the groups resembled an organized crime network, prompting authorities to apply Article 114 of the Criminal Act, which covers the formation of criminal organizations.
Police also arrested a money launderer accused of disguising 3.5 billion won in proceeds as gift-card transactions and identified 145 individuals who had illegally collected personal data for use in illegal loan marketing. Another 136 burner phones used for advertising were disabled.
“Illegal private lenders that target economically vulnerable citizens during difficult times will be met with strict enforcement,” a police official said, urging victims of short-term, high-interest loans to seek help from law enforcement or the Gyeonggi Welfare Foundation.
M. H. Lee (mhlee@koreabizwire.com)
