FSS's 'Certificate Confirming Invalidity of Illegal Loans' Leads to First Criminal Acquittal

High-Interest Loans Disguised as Gift Certificate Transactions
Court Acquits Victim of Fraud Charges
After Civil Order to Return Unjust Enrichment, Certificate Also Used as Evidence in Criminal Case

A certificate issued by the Financial Supervisory Service (FSS) confirming the invalidity of an antisocial loan contract was admitted as evidence in court and used as grounds for the first criminal acquittal of a victim of illegal private lending charged with fraud.

The FSS said on October 26 that the court had used the certificate as grounds for its decision on September 29, helping protect the rights of a victim of illegal private lending.

The case stemmed from a high-interest loan disguised as a reservation-based gift certificate transaction. A gift certificate buyer who was engaged in illegal private lending filed a complaint against the victim, a gift certificate seller, alleging fraud involving the gift certificates. However, the court found that the transaction was in fact a small loan disguised as a gift certificate sale.

The court found that the buyer had not paid money after being deceived by the seller, but had instead accepted the risk of being unable to recover the money in order to earn high interest. In reaching its decision, the court relied on a certificate in which the FSS had determined that the contract was an illegal loan contract against public order and morals.

Earlier, in August, a court also issued a payment order for the return of unjust enrichment in a case involving a victim of the same type of reservation-based gift certificate transaction. The victim had attached a certificate confirming the invalidity of the contract when filing the claim against the gift certificate buyer, who was engaged in illegal private lending. The court viewed the transaction as a loan of money and recognized the victim's civil claim for the return of unjust enrichment.

Since March, the FSS has been issuing certificates under the name of the FSS governor confirming the invalidity of antisocial loan contracts, including loans with annual interest rates exceeding 60%. The certificates are sent to both the victim and the illegal lender as soon as an application is submitted, encouraging the immediate cessation of debt collection. As of October 26, 573 certificates had been issued, covering 941 debts.

The FSS plans to work with relevant organizations, including the Korea Legal Aid Corporation and the police, to help ensure that the certificates can be used as evidence during investigations and trials.

An FSS official said, "Together with the Financial Services Commission, the National Police Agency, the Credit Counseling and Recovery Service, and other organizations, we will step up public outreach about the system. We will also incorporate reports from victims into an artificial intelligence (AI) analysis system to support investigations into illegal private lending and use the findings in special judicial police work to protect the public. We will expand dedicated staffing to shorten the time needed to review applications for certificates confirming the invalidity of contracts."

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