Teens are targets for expensive, fast loans

The Financial Supervisory Service building located in Yeongdeungpo District, western Seoul. [YONHAP]

Teens are being encouraged to borrow money at high interest rates, prompting the Financial Supervisory Service (FSS) to advise caution.

A certain type of moneylender encourages teens to borrow to buy concert tickets or finance their gaming expenses, the FSS said.

The watchdog said Thursday it started receiving reports last June — 2,100 reports have been filed since.

Only two reports detailed serious financial damage, but the FSS worries since teens do not tell their family members or friends about the loans.

The moneylenders lend relatively small amounts ranging from 10,000 won ($8) to 300,000 won and give teens two to seven days to pay back.

The terminology used in contracts is intentionally kept informal or misleading. Interest rates are referred to as service charges, for example.

Interest rates run from 20 to 50 percent, and if the kids don't pay back on time, they can face late fees of between 1,000 won and 10,000 won per hour.

The FSS said the cost of borrowing is equivalent to a private loan with an over 1,000 percent yearly interest rate.

The moneylenders sometimes ask the teens for contact information of family and friends, allegedly for identification purposes.

There have also been incidents of teens working for the moneylenders being accused of bullying at school.

The FSS said it is cooperating with the police and other relevant institutions to put out warnings.

“Teenagers must be careful not to borrow money from these moneylenders,” said the FSS, “no matter how much they need money.”

BY LEE JI-YOUNG [lee.jeeyoung1@joongang.co.kr]