Illegal Loan Deals Hold No Legal Force
— Stay Safer from Illegal Private Lending
- A total of 124 laws, including the Act on Registration of Credit Business and Protection of Finance Users, coming into effect in July
Starting in July, legal grounds will be established to nullify illegal loan agreements, and a system for advance payment of child support will be implemented. The Ministry of Government Legislation (Minister Lee Wan-kyu) announced that a total of 124 statutes will come into effect in July. Some of the key details and enforcement dates of the forthcoming statutes are as follows.
Grounds Established to Nullify Illegal Loan Agreements (「ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS」, July 22)
From July 22, the terms "unregistered lender" and "unregistered loan broker" will be replaced with "illegal loan shark" and "illegal loan broker." This change is intended to more clearly define the illegality of lending or brokering without registration or renewal under the Act. Additionally, illegal loan agreements involving anti-social conduct may be rendered null and void, including both the principal and the interest. This includes loan agreements that involve acts violating human dignity, such as demanding sexually humiliating visual materials, human trafficking, or bodily harm. It also applies to contracts with excessively high interest rates deemed anti-social. Meanwhile, registration standards for credit service provider will be strengthened. The minimum capital requirement for credit service provider registering with city or provincial governors will increase from 10 million won to 100 million won. A new requirement of 30 million won in capital will be introduced for loan brokers. Both credit business or loan brokerage business will also be obligated to maintain the required level of capital. Lastly, penalties for illegal private lending will be significantly enhanced. The maximum penalty will be raised from up to five years of imprisonment or a fine of up to 50 million won to up to ten years of imprisonment or a fine of up to 500 million won following the amendment.
Advance Child Support Payments to Ensure Stable Parenting (「ACT ON ENFORCING AND SUPPORTING CHILD SUPPORT PAYMENT」, July 1)
Beginning July 1, the child support advance payment system will be implemented to promote the welfare of minor children in single-parent families and ensure stable childrearing. Under this system, the Child Support Agency pays the child support to the custodial parent who is directly raising the child on behalf of the obligor, and subsequently seeks reimbursement from the obligor. If the obligor fails to repay the amount, the agency may, with the approval of the Minister of Gender Equality and Family, collect the payment in accordance with procedures similar to national tax enforcement. To improve the recovery rate, when advance payments are made, the Minister may request the obligor's financial, credit, and insurance information without their consent. Additionally, to prevent concealment of assets, the scope of property investigations will include virtual assets. The period for obligors to explain or dispute before being publicly listed as a child support defaulter will also be shortened from over three months to over 10 days, allowing for more prompt enforcement.
Simplified Small-Amount Indemnification Procedures to Enhance Public Convenience (「ENFORCEMENT DECREE OF THE ACT ON THE PERFORMANCE OF DUTIES BY POLICE OFFICERS」, July 30)
Starting on July 30, indemnification for loss caused by lawful performance of police duties will be provided more promptly to citizens who suffer damage to property or other losses. Under the Act on the Performance of Duties by Police Officers, indemnification refers to monetary compensation provided by the State when a police officer, in the course of lawful duty, causes loss of life, bodily injury, or property damage either to a person not responsible for causing the loss, or to a person responsible for the loss but suffering damage beyond the extent of such responsibility. Previously, there was no statutory deadline for processing indemnification claims, resulting in potential delays in decision-making. Going forward, within 60 days of receiving a compensation claim, the committee for deliberation on compensation for loss must deliberate and decide whether to provide compensation and the amount. In addition, for small claims not exceeding 1 million won, deliberation and resolution may be conducted by a subcommittee consisting of three police officers, rather than the full committee, in order to expedite the process and enhance convenience for citizens.
Free Leasing of Abolished School Properties Allowed (「SPECIAL ACT ON THE PROMOTION OF UTILIZATION OF ABOLISHED SCHOOL PROPERTY」, July 22)
From July 22, alternative education institutions will be able to borrow property or facilities from abolished public schools at no cost. Alternative education institutions provides a learner-centered education that aims to develop individual aptitudes and talents through a variety of educational content and teaching methods that meet individual characteristics and needs. The superintendents of education in each City or Do can lend abolished school property to alternative education institutions free of charge. This initiative aims to effectively utilize abolished school facilities nationwide and strengthen support for alternative education institutions.
The reasons for the enactment of the new statutes, including those stated above, can be found at the Korean Law Information Center (www.law.go.kr).
(Unofficial Translation)
