Supreme Court: "Full Forfeiture Required Even If Illegal Interest Is Returned"

Lent 34 Million Won, Collected 324% Annual Interest
Returned Excess Interest to Victim During Trial
Full Forfeiture Ordered by Lower Courts, Confirmed by Supreme Court

The Supreme Court has issued a final ruling stating that even if illegal interest, collected in excess of the statutory maximum interest rate, is fully returned to the debtor during trial, the entire amount must still be confiscated by the state as it is considered criminal proceeds that have already been acquired and spent.

Supreme Court, Seocho-gu, Seoul. Photo by Yonhap News.

On June 5, the Supreme Court's Division 2 (Presiding Justice Oh Kyung-mi) upheld the lower court's decision in the appeal trial of unregistered loan shark A, who was charged with violating the Act on Registration of Credit Business and Protection of Finance Users, among other charges. The court finalized a sentence of four months in prison, suspended for one year, and ordered the forfeiture of approximately 47.65 million won.

From November 2018 to July 2019, A was indicted for lending approximately 34 million won to debtor B, then collecting a total of 82.5 million won as principal and interest. The applied interest rate at the time exceeded 324% per annum, and the amount of illegal interest collected by A in excess of the statutory limit (24% per annum) alone reached about 47.65 million won.

During the first trial, A returned a total of 55 million won to B as a settlement, which represented the full amount claimed for unjust enrichment. This raised the legal question of whether it would violate the principle of proportionality to again order forfeiture of the same amount from a defendant who had already returned all criminal proceeds to the victim.

The first and second instance courts ruled that this did not violate the principle of proportionality and ordered the full forfeiture of the excess interest. They reasoned that since A had withdrawn and either concealed or spent the interest as cash, the subsequent return of the funds did not exempt them from forfeiture.

The Supreme Court agreed with the lower courts' decision. The justices stated, "Even if the defendant returned all of the excess interest received, it was merely a return of funds after the criminal proceeds were already spent," and added, "With regard to the application of the Act on Regulation and Punishment of Concealment of Criminal Proceeds, even considering the principle of proportionality, the lower court did not err in ordering forfeiture of the entire excess interest, nor did it misunderstand the requirements for criminal proceeds or the legal doctrine of proportionality."

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