The Financial Supervisory Service of South Korea has implemented a system to issue invalidity confirmation letters for loan contracts with interest rates exceeding 60%, to assist victims of illegal lending.
Starting today, the Financial Supervisory Service (FSS) of South Korea will issue an invalidity confirmation letter under the name of the FSS chairman for loan contracts that confirm interest rates exceeding 60% annually. This measure is aimed at helping victims of illegal financial practices to halt collection activities or engage in legal actions for the return of undue gains. This new system reflects changes made to the Moneylending Business Act that categorizes high-interest loan contracts as anti-social lending contracts, whereby both the principal and interest become invalid. Such changes apply to contracts signed after July 22 of last year.
To obtain the invalidity confirmation letter, victims must visit the FSS website or the Credit Recovery Commission and submit relevant documentation such as contract details and transaction history. The FSS will review the interest rates, loan, and repayment records, and if deemed an anti-social lending contract, will issue the confirmation letter. This letter can be sent to illegal lenders via phone or messaging services like KakaoTalk and Telegram, and can also be provided to the victims upon request. The creation of this confirmation letter is a crucial tool for victims seeking to stop illegal collections and utilize in civil lawsuits for the return of the principal and interest.
An FSS official stated that high-interest loan contracts can be deemed illegal and that victims can leverage the invalidity confirmation letter to terminate collection efforts by illegal lenders and seek protection for their rights. This new initiative is an important step towards safeguarding individuals from predatory lending practices, which have become a serious issue in South Korea.
