'2,703%' Gift Certificate Loan Shark Interest... Seoul to Launch Special Investigation

Illegal Loan Sharking Disguised as Gift Certificate Transactions
Investigative Teams Deployed to Target Clandestine High-Interest Lending Schemes

On July 30, the Seoul Metropolitan Government announced that it would launch a focused special investigation into so-called "gift certificate loan sharking" schemes that use gift certificates. A typical case involves disguising loan lending as advance sales of gift certificates and then charging exorbitant interest rates.

To this end, the Seoul Metropolitan Government’s Public Welfare Investigation Bureau has organized three investigative teams, assigned them to different districts, and will conduct intensive monitoring of illegal lending advertisements posted on online communities and social media platforms.

In particular, the city plans to strictly crack down on unregistered loan operations and interest charges that exceed the legally permitted annual rate of 20%, by conducting information gathering, on-site investigations, and receiving public reports in parallel.

For phone numbers used in illegal lending operations, the Public Welfare Bureau will actively utilize the "Burner Killer System" it operates to immediately block illicit business activities. The Burner Killer System is designed to repeatedly call phone numbers used for illegal lending in order to make connecting calls difficult and thereby suppress illegal operations.

Recently, the courts have ruled that, even if conducted in the form of a gift certificate transaction, if a structure involves actually lending money and collecting large repayments, it constitutes a violation of the Lending Business Act. In April of this year, a defendant who disguised such schemes as advance sales of gift certificates and collected annual interest rates as high as 2,703.7% was sentenced to 10 months in prison. When small amounts are lent out and high repayments are demanded in a short period, the resulting annualized interest rate can qualify as a usurious rate, an illegal act under the Lending Business Act.

Additionally, threatening to file criminal charges in the case of late repayment, or repeatedly contacting the borrower’s family or acquaintances by phone or text, may constitute illegal debt collection practices prohibited by current laws.

The Public Welfare Bureau will also produce and distribute short-form videos, featuring Seoul’s character "Haechi," to help prevent harm to vulnerable groups such as young people, individuals with low credit, and self-employed workers. These videos will clearly explain the dangers of illegal high-interest lending disguised as gift certificate pre-sales, provide real-world examples, and offer guidance on how to respond, in order to raise public awareness.

Citizens who have suffered harm from "gift certificate loan sharking" or have witnessed related illegal acts can report them via the Seoul Metropolitan Government’s website or the Economic Investigation Section of the Public Welfare Investigation Bureau. Whistleblowers can receive a reward of up to 200 million won, subject to review by the authorities.

Lee Changseok, Director of the Public Welfare Investigation Bureau of the Seoul Metropolitan Government, stated, "Illegal loan sharking disguised as gift certificate sales is a representative crime that exploits the desperation of citizens experiencing economic hardship," adding, "We will strengthen our investigations into illegal private lending organizations, while also doing our utmost to protect victims and prevent further harm."

This content was produced with the assistance of AI translation services.