"Demanding Excess Interest Under the Guise of Travel and Parking Fees"... FSS Issues 'Caution' Consumer Alert Over Illegal Vehicle-Collateral Loans

The Financial Supervisory Service has issued a consumer alert of 'caution' over high-interest, modified vehicle-collateral loans.

The move came after a number of reports were filed on modified illegal private lending schemes, in which lenders secured borrowers' vehicles as collateral and charged interest above the legal limit. A total of 12 cases were reported.

According to the Financial Supervisory Service, these lenders demanded extra interest from borrowers under various pretexts, such as travel and parking fees. In some cases, they also caused losses by using the collateralized vehicles without permission. During debt collection, some even threatened borrowers by saying they would report them to car installment-finance or leasing companies and get them prosecuted.

The victims borrowed between 2.5 million won and 30 million won, and the interest rates reached as high as 229 percent a year. By age group, people in their 30s accounted for half of the victims, with six cases, making them the largest group. There were two victims in their 60s, and one each in their 20s, 40s and 50s. By residence, nine victims were in the greater Seoul area, including five in Gyeonggi, three in Seoul and one in Incheon. Others were in Daegu, Gyeongnam and Gwangju, one each.

The Financial Supervisory Service said that illegal private lending crimes are increasingly evolving into forms that deceive financial consumers, causing damage to spread. It urged the public to remember that any charges imposed by a lender, regardless of whether they are labeled parking fees, travel expenses or commissions, are all included in interest. It also warned that leased or installment-purchased vehicles may not always be eligible as collateral for loans. If a modified illegal private lending scheme is suspected, it added, people should actively report it to the Financial Supervisory Service or law enforcement authorities to prevent further harm and seek relief.

Kim So-hyung, compact@sportschosun.com