Police take aim at loan sharks as illegal lenders threaten victims with nude photos, public shaming

Police will step up crackdowns on illegal lending by assigning dedicated investigators and introducing undercover operations, as criminal methods become increasingly violent and sophisticated.

The National Office of Investigation under the Korean National Police Agency (KNPA) on Wednesday unveiled a comprehensive plan to eradicate illegal lending crimes. The new plan is focused on disrupting criminal networks, strengthening investigations and improving protection for victims.

Since launching a special crackdown in November last year, police have apprehended 2,060 people involved in illegal lending — including 76 taken into custody — through June.

But as illegal loan sharks turn to increasingly vicious tactics — such as threatening to release nude photos obtained from borrowers during the loan process — police find that stronger measures are needed.

Police also cited the growing use of so-called gift certificate presale schemes, a form of illegal lending in which borrowers receive cash upfront and later repay the loan with gift certificates or a larger cash payment.

As a response, police will assign at least one dedicated investigator to each of 105 police precincts nationwide that handle 20 or more illegal lending cases a year.

The dedicated investigators will be responsible not only for investigating cases but also for counseling victims and overseeing the removal or blocking of phone numbers and online posts used in illegal lending schemes.

Police also plan to expand the authority to request the suspension of phone numbers used for illegal debt collection. The authority, currently held by the KNPA commissioner, will be extended to chiefs of police precincts nationwide to enable faster responses when cases arise.

The expanded authority comes as police have sharply increased their use of phone number suspensions. Requests to suspend phone numbers linked to illegal lending rose from 18 in 2024 to 375 last year.

Police will also work with financial authorities to establish a system allowing bank accounts used in illegal lending crimes to be frozen more quickly.

More recently, illegal lenders have increasingly resorted to "public shaming" debt collection by posting or circulating borrowers' IDs and photos on social media.

Police plan to work with operators of different online platforms to develop guidelines for removing and blocking such content to prevent further harm.

Authorities will also seek amendments to Korea's credit business law to permit undercover investigations in illegal lending cases and strengthen joint crackdowns with related agencies, such as the Financial Supervisory Service and local governments' special judicial police.

Police will also seek pre-indictment orders to preserve assets for confiscation and forfeiture in all illegal lending cases. The aim is to recover criminal proceeds, including illegally collected excess interest, and cut off illicit profits at the source.

Beginning next month, police will also launch a one-stop support system linked to the Credit Counseling & Recovery Service's mobile application. Once a victim requests counseling, protection and support procedures will begin immediately. Police expect the system to provide faster relief for victims than before.

Reports of illegal lending cases rose 305.2 percent over four years, from 1,362 in 2021 to 5,519 last year, according to the KNPA.

However, the booking rate fell from 74.7 percent to 61 percent during the same period as criminals increasingly relied on encrypted messaging apps, burner phones and bank accounts under borrowed names.

The majority of the victims are reportedly working on a daily wage or are self-employed. The share of young victims in their 20s and 30s who are new to the workforce is also increasing. More recently, police have seen a rise in crimes targeting teenagers and foreign workers.

Police said they will strengthen prevention campaigns tailored to different age groups and occupations.

Police also vowed to hunt down illegal lenders to the very end and recover their criminal proceeds.

BY JEONG JAE-HONG [[email protected]]