Korea links financial, local welfare agencies in fast-track referral for illegal lending victims

South Korea's health ministry said Friday it will launch a system connecting victims of illegal private lending to local welfare services, as part of a government push to catch financial distress early and act on it quickly.

Starting Oct. 30, the Financial Supervisory Service and the Credit Counseling and Recovery Service will refer households in financial crisis identified during counseling on illegal lending damage directly to their local governments through the social security information system, according to the Ministry of Health and Welfare. Local officials will then confirm the cases, consult and investigate, and provide or arrange welfare services within seven days, including emergency welfare assistance and applications filed by officials on their own authority.

The arrangement runs in both directions. If a local government uncovers illegal lending damage or debt problems during a welfare consultation, it can refer the case back to the Financial Supervisory Service and the Credit Counseling and Recovery Service for damage support and debt adjustment.

The referral system is a follow-up to a government plan drawn up in July to identify and strengthen support for households in financial crisis, the ministry said, as damage from illegal private lending has grown.

"For victims of illegal private lending who urgently need protection, it is important to detect the warning signs early and provide the welfare services they need at the right time," said Hyun Soo-yeop, the ministry's first vice minister. "Financial institutions and local governments will look together at the difficulties people face in their daily lives and quickly connect those in urgent need of protection to support."

The referral launch comes as reports of illegal private lending continue to rise. Cases filed with the Financial Supervisory Service's damage reporting center totaled 14,786 in 2024 and 16,988 in 2025, and reached 9,870 in the first half of 2026.

The ministry also said it is promoting a new debt counseling hotline, 1375, which the Credit Counseling and Recovery Service officially opened on Oct. 29, so that residents struggling with debt can receive one-stop counseling.