Loan Sharks Multiplying as Economy Sinks

The nation's top financial regulator reported Sunday that there has been rapid growth in loan sharking. According to the Financial Supervisory Service the number of people and organizations who lend money, mostly to lower- and middle-income people, at interest rates of 70 to 80 percent a year, reached 1,412 last year, up 30 percent from a year earlier.

In its recent survey of the industry, the Financial Supervisory Service projected that the number would exceed 3,000 if private money lenders that have not registered their businesses with the government were included.

The registered 1,412 usurers comprise 883 corporate lenders and 545 individuals, according to the financial watchdog. It projected that more private lenders will spring up this year due to the economic slowdown, with workers turning to private lenders to supplement reduced earnings.

The financial agency said a decline in the number financial institutions, such as mutual finance companies, provided an opportunity for these private lenders to crop up. Also, tighter qualifications by institutional loan providers, such as banks, is another major reason working-class people are forced to seek out high-interest rate lenders, according to the government agency's report.

The financial agency is currently mulling a plan with the Ministry of Finance and Economy to establish rules that regulate these money lenders. "We need to enact laws to stop usurers from charging exorbitant interests by putting a ceiling on annual interests at 29 percent like Japan," said one official at the agency.

by Cheong Chul-gun