Government works to eliminate loan sharks

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Government works to eliminate loan sharks

The Seoul city government has been working to crack down on loan sharks who prey on victims who borrow little but end up facing huge debt because they cannot pay the steep interest rates.

Such was the case for a 48-year-old self-employed businessman from Jungnang District in northeastern Seoul, who found himself in need of emergency funds. He had to urgently repay bank loans and needed more funds to manage his business, so he resorted to a loan shark.

It was easy to obtain a contact, as he was one day handed a business card advertising “immediate loans” and “cheap interest rates” by a motorcycle messenger passing by. In October 2014, he borrowed 10 million won ($8,754) from a loan shark, under the condition he pay back 12 million won within 100 days.

But he was not able to pay it back within that time.

To pay back the overdue interest, he borrowed more money, and his debt snowballed as interest piled up.

When the Seoul Metropolitan Government’s judiciary police cracked down on this loan shark in March, he had amounted debt of 100 million won.

Between January and September, Seoul’s judiciary police cracked down on 23 illegal loan agencies and booked 37 individuals.

“People can too easily obtain business cards of illegal lenders,” a judiciary police official pointed out. “And there is an increase in small-sum loans.”

He said that through May, more than 4,600 victims have been taken for roughly 6.4 billion won, though the number is larger if the cases currently under investigation are included.

Between January and September, the police cracked down on 23 illegal loan sharks, who had about 5,000 clients.

The most common type of loan shark that the judiciary police found were those who, in exchange for signing a contract to a mobile phone worth 1.2 million won, would lend around 800,000 won. The problem was, they were disguised as mobile phone stores, deceiving unknowing victims.

“When you think of loan sharks, you imagine mafia guys sitting in some dark, shady office,” said Park Ok-san, head of the team investigating loans with Seoul’s judiciary police. “But when they are disguised as mobile phone stores, those who are seeking loans are eased of any fear.”

Another method requires no face-to-face contact with the shark, at all. A loan shark can make an open market site on the internet and create a virtual store to lend small sums through mobile phones. Still another method is to use portal websites to allow people to post the amount of money needed with their contact information. The loan shark will then arrange to meet at a cafe to hand over the cash.

A 32-year-old loan shark was arrested in September at a cafe in Hapjeong-dong in Mapo District, western Seoul. His account books had the contacts of 25 people who had received loans, mostly self-employed small-business owners, including cosmetics store owners and butchers. They had loans ranging from 300,000 won to 3 million won.

“In order to alleviate the concerns of those seeking loans, loan sharks give loans in a variety of places,” said Kim Yong-nam, a senior official with Seoul’s judiciary police. “People should be wary that small loans can start out at 100,000 won and quickly expand to millions and tens of millions of won.”

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