By Kim Tae-gyu
Staff Reporter
Following instructions from President Lee Myung-bak, the government is poised to crack down on loan sharks, who victimize many borrowers here.
The Financial Services Commission (FSC) said Tuesday that it will come up with a series of measures to get rid of loan sharks and help the financially marginalized.
Among the measures are lending some three trillion won to low-income households at low interest rates and rewarding those who report illegal moneylenders.
``We plan to take a two-pronged approach. The first is to hunt down loan sharks in collaboration with other ministries and law enforcement agencies,'' an FSC director said.
``The other is to help those struggling financially and who are vulnerable to exorbitant interest rates from private moneylenders,'' he said.
As to specific action plans, the police will give up to 10 million won to those who report loan sharks. In a break from the past, victims themselves will be eligible for the reward starting next month.
The ongoing investigation into moneylenders will also continue. If they are suspected of dodging taxes, they will be subject to audits.
The FSC will also encourage banks and credit guarantee agencies to extend fresh credit to the poor at relatively low interest rates.
All available loans are identifiable at its customized Web site, which is accessible through s119.fss.or.kr.
``We're determined to bring illegal private lending under control. The lenders find it easy to profit by squeezing people with ultra-high interest rates,'' the FSC director said.
The number of victims of unlawful moneylenders has substantially went up recently, as amply demonstrated by increasing reports to the government.
A total of 39 people claimed to the FSS that they were victimized by loan sharks in 2006. The number increased to 57 and 81 in 2007 and 2008, respectively.
Experts expect the figure to snowball this year since low-income households, typically with no mortgages and bad credit ratings, are likely to resort to private moneylenders to survive the financial crisis.
The FSC estimates that more than 300,000 Koreans borrowed about 2.6 trillion won from unregistered moneylenders.
The issue had grabbed little attention but the deaths of two victims ― a female varsity student and her father ― rang alarm bells on the unscrupulous moneylenders.
Back in March 2007, the 22-year-old collegian, identified as Lee, borrowed three million won from a loan shark identified as Kim, 31, to start an Internet-based shopping business.
The business did not fare well. Accordingly, she failed to repay the principal and prohibitively high interest rate of 345 percent, which is well above the legal ceiling of 66 percent ― later it was revised down to 49 percent.
As her total liabilities ballooned five-fold to 15 million won in a year, Kim forced her into prostitution. She had no choice but to accept in April 2008.
Lee returned up to 18 million won she made by selling her body to Kim over the following months but the pace of reimbursement couldn't match snowballing interest; Lee still owed money to Kim despite returning 600 percent of the initial loan. Kim then informed her father of the situation while urging him to repay the money.
Frustrated, Lee's father strangled her on Nov. 28 and killed himself two days later, causing shock across the nation. President Lee immediately ordered the FSC and the Ministry of Justice to draw up policies to prevent a recurrence of such tragic deaths.