The scale of illegal private lending victims reaches a 13-year high... The adverse selection caused by domestic demand recession and loan restrictions

Last year, reports of illegal private finance victimization exceeded 17,000 cases, reaching the highest level in 13 years. Analysts believe this is due to the combined effect of increased government loan restrictions and sluggish domestic demand, forcing many people to rely on illegal private finance.

According to data obtained from the Financial Supervisory Service by Lee In-Young, a member of the Democratic Party affiliated with the National Assembly’s Political Affairs Committee, a total of 17,538 reports of illegal private finance victimization were filed last year. This is the highest number since the establishment of the Illegal Private Finance Victimization Reporting Center in 2012, approaching the 18,237 cases recorded at that time. In terms of specific types, unregistered lending companies received the most reports, totaling 9,293, followed by debt collection, high interest rates, and illegal advertising.

Analysis indicates that the surge in reports of unregistered lending companies is mainly due to the spread of non-face-to-face channels such as social media, making it easier for illegal operators to enter the market. Additionally, some suggest that government loan restrictions and policies to curb real estate overheating have made it difficult for low- and middle-credit individuals to obtain loans through formal financial systems, leading to increased demand for illegal private finance.

Ahn Yong-seop, director of the Common People Finance Institute, diagnosed that the combination of loan restrictions and economic downturn has worsened income conditions, while financial support aimed at ordinary people is shrinking, leading to this phenomenon. The Financial Services Commission also stated that, in managing household debt, they are considering the possibility that low- and middle-credit individuals may be pushed toward illegal private finance.

To reduce victimization from illegal private finance, the government is building a nationwide “one-stop comprehensive and dedicated support system” to provide close assistance and plans to introduce various preventive measures, including expanding access to public finance for ordinary people. Experts emphasize the need to broaden medium-interest loans through higher-interest savings banks or credit card companies and to urgently develop supplementary plans within the overall regulatory framework.

This trend indicates that multiple policy measures will be necessary in the future to improve the financial environment for ordinary people and reduce illegal private finance victimization.