SEOUL, South Korea — The calling card, thrown with expert precision from a motorcycle as it sped away, landed at Park Chui-woo’s feet as he neared his wits’ end .
The brightly colored card advertised fast, low-interest loans, especially for small business owners. Maxed out by all other lines of credit and with payday looming for employees at his small coffee shop chain, Park dialed the phone number.
With that call three years ago, he entered the underworld of illegal private lending that tempts desperate South Koreans and then traps them with crippling interest rates, oppressive collection methods and a slippery slope to more debt.
Soon, tattooed skinheads on motorbikes showed up to chat with Park. They deposited a wad of cash and started coming to his store daily to collect interest, at an annualized rate of about 210%.
“You really have no other choice,” said Park, 45, who has been borrowing from private loan sharks for about three years and had to increase the sum after the COVID-19 pandemic ravaged sales of his cafes. “It can send you into a sand trap.”
Debt is the main motivating factor for the characters in Netflix’s hit “Squid Game,” a dystopian drama series in which 456 heavily indebted contestants fight to the death – literally – for a chance to win a $45 windfall, 6 billion won (about 40 million dollars).
The South Korean series resonated around the world, tapping into growing economic fears and becoming the streaming service’s most popular release to date, racking up 111 million views in its first 28 days. At home, however, the show’s popularity is inseparable from the country’s very real crisis, characterized by rising household debt, gaping inequality and a weak social safety net with significant blind spots.
South Korean household debt hit record highs in the second quarter of 2021, jumping more than 10% from the same period last year. Citizens in their 30s are the most indebted, having borrowed more than 260% of their income on average, according to the Bank of Korea. Soaring house prices and booming stock markets last year fueled borrowing, prompting young adults who see less promise in traditional employment and have turned to heavy investments in stocks or cryptocurrencies.
Official statistics don’t capture the illicit world of private lending that Park and “Squid Game” protagonist Seong Gi-hun turned to when they could no longer borrow from banks and legally registered lenders, including loans are capped by law at an annual interest rate of 20%.
At the start of the series, Seong, a laid-off auto worker plagued by a gambling addiction after failed attempts to start a business, is chased by moneylenders in black suits and wielding a knife who force him to sign a commitment to give up a kidney. and an eye if he doesn’t repay in a month. Seong, played by Lee Jung-jae, then enters the “Squid Game”, where each character’s debt is revealed, and childhood games like “Red Light, Green Light” become brutal.
“All of you in this room are in crippling debt and you are now on the edge of a cliff,” a gambling runner told the gathering. “Do you want to go back and live your pathetic life running away from creditors? Or will you take the last opportunity we offer you?
South Korea’s obscure loan activity is difficult to quantify but appears to be pervasive. Cards and flyers advertising quick money are easily seen on subway cars, bus stops and lampposts. The government regulator, Financial Supervisory Service, received nearly 300,000 reports of illegal loan announcements in 2020. This represents an increase of around 25% on the previous year, no doubt boosted by layoffs linked the pandemic and trade restrictions that have pushed already vulnerable people deeper into finance. straits.
The Seoul-based industry group Consumer Loan Finance Assn. said it negotiated more than 5,000 high-interest loan cases reported last year, in which the average annual interest charged was 401%. In one case in Gyeonggi province, which includes parts of the metropolitan area surrounding Seoul, interest on a short-term loan was 3,338 percent annualized, police said.
“Killing interest rates are being charged below the surface,” said Seo Bo-kuk, senior executive at Consumer Loan Finance Assn. “It becomes a domino effect, and a lot of people end up coming back to it over and over again.”
Contracts that ask for a kidney or an eyeball instead of reimbursement are an old-fashioned bullying tactic and are no longer common, industry officials say. Even so, they are depicted in “Squid Game” and other TV shows and movies, instilling fear among those in debt to scurrilous moneylenders. South Korea’s richest man, Seo Jung-jin, founder of biopharmaceutical company Celltrion, has said in interviews that he had to pledge his organs as collateral to borrow from loan sharks to keep his business afloat after the Asian financial crisis of the early 2000s.
“My debt wouldn’t be covered even if I sold all my organs,” said Park, the cafe’s owner, who noted that his lenders had never made such promises.
Nowadays, lenders demand the phone numbers of relatives and friends of debtors in order to harass them if the debt is not paid on time, or they show up at debtors’ workplaces, according to the accounts of the industry. Some go further. In 2017, a 27-year-old private moneylender from the city of Incheon was sentenced to five years in prison for sexually assaulting a woman who owed him around $8,500.
“People go there knowing that the interest rates are high,” said Jung Deok-gil, a supervising investigator at the Gyeonggi Province Criminal Investigation Special Division. “They use it because they desperately need the money but don’t have the credit.”
Park said illegal creditors have been a lifeline in paying its employees and keeping its stores open. Earlier this year, he successfully weaned himself off loans, but returned to them a few months ago when prolonged pandemic restrictions and other complications hurt his business. Currently, he has two 60-day loans of 20 million won (about $17,000) each. In all, he has approximately $850,000 in debt, legal and otherwise.
“I have no bitcoin, no stocks, no real estate, no inheritance,” he said. “For someone like me, in the South Korean financial system, we can’t do without private loans.”
For now, he’s barely hanging on – relieved to have made October’s payroll. He didn’t have time to watch “Squid Game” or think about it beyond the headlines about the show. The reality in South Korea, for him, is quite dystopian.
“Once COVID-19 is over, it could be a whole different game,” he said. “All the social issues that we swept under the table and pushed back during the pandemic – it’s a huge ticking time bomb.”