South Korea’s financial regulator is stepping up efforts to combat the rise of illegal private lending tied to gambling-related debt, as authorities warn of increasingly severe exploitation targeting vulnerable individuals, including young adults and minors. (Image created by ChatGPT)
SEOUL, April 27 (Korea Bizwire) — For a man in his twenties, a single desperate loan marked the start of a brutal spiral. Borrowing 200,000 won with the promise to repay double just a week later, he soon found himself crushed by mounting debts.
When relentless collectors showed up at his daughter’s kindergarten, he saw no way out — and ultimately became part of the very organization that had entrapped him, forced to collect on others to repay his own mounting obligations.
His story is becoming all too common in South Korea, where the rise of illegal lending tied to gambling debt is alarming authorities and social workers alike.
This week, the Financial Supervisory Service (FSS) announced new joint efforts with the Korea Center on Gambling Problems to stem the tide of exploitation, warning of a disturbing nexus between compulsive gambling, illegal high-interest lending, and organized crime.
At the heart of the crisis are “20-40 loans,” a predatory lending scheme where borrowers must repay 400,000 won just one week after taking out 200,000 won — a setup tantamount to an annualized interest rate of 5,000 percent.
When debtors fall behind, lenders resort to aggressive and illegal tactics, harassing borrowers at their homes, workplaces, and even schools.
Worse, many victims — desperate to avoid harassment or retaliation — are drawn deeper into criminal networks. Joining illicit loan collection rings becomes the price for buying time or reducing their debts. “It’s a structure that inherently breeds harsher, more brutal collection practices,” an FSS official said.
Young people are increasingly at risk. Cases of teenage gambling, illegal proxy lending to minors, and social media-fueled gambling apps are on the rise, creating a generation exposed to financial ruin before reaching adulthood.
To combat the crisis, the FSS plans to blanket the country with prevention campaigns: posters and awareness videos will appear at 15 national gambling prevention centers, 46 partner counseling institutions, Kangwon Land, and racetracks.
This summer, letters warning about illegal gambling and predatory lending will be distributed to families through middle and high schools across all 17 provincial education offices.
“We will block illegal lending advertisements, expand consumer warnings, and refer more cases for criminal investigation,” said an FSS spokesperson.
The deeper fear, experts warn, is that without swift intervention, illegal gambling and underground lending could entrench themselves further into the social fabric — exploiting the country’s youngest and most vulnerable.
M. H. Lee (mhlee@koreabizwire.com)
I am interested in the gender split for gamblers who borrow money this way, please. Any data available? What percentage is male, what percentage is female?