A court may order the forfeiture of the full amount of interest that an illegal private lender collected above the legal maximum rate, even if the lender later returned all of it to the borrower, the Supreme Court has ruled.
The Supreme Court's Second Division, with Justice Oh Kyung-mi as the presiding justice, on Friday upheld a lower court ruling that sentenced a defendant identified as A to four months in prison, suspended for one year, and ordered forfeiture of about 47.66 million won. A had been indicted on charges including violation of the Lending Business Act.
A was put on trial on charges including violating the Lending Business Act for lending about 34 million won to a person identified as B between November 2018 and July 2019, and collecting 82.5 million won in principal and interest. The applied interest rate was about 324 percent per year, more than 10 times the legal maximum rate, which was 24 percent per year at the time. The interest collected above the legal maximum rate amounted to about 47.66 million won.
The first-instance court ordered forfeiture of the entire 47.66 million won in excess interest. A appealed, arguing that the forfeiture amount was excessive because he had already returned the money. He claimed he no longer held any criminal proceeds.
The second-instance court rejected A's argument and dismissed the appeal. It held that excess interest becomes criminal proceeds the moment it is received, and that returning it later is merely a matter of civil restitution and does not make the criminal proceeds themselves disappear. The appellate court explained that "the violation of the Lending Business Act through the collection of excess interest constitutes a 'serious crime' under the Act on Regulation and Punishment of Criminal Proceeds Concealment, and the excess interest, which is property generated by it, constitutes 'criminal proceeds.'" It added that "since A withdrew the excess interest collected from the borrower from a cash dispenser and concealed and spent it, he is not excluded from forfeiture even if he returned it afterward."
The Supreme Court also upheld the lower court's judgment that an amount equivalent to the excess interest could be forfeited. The Supreme Court said, "Even if the defendant returned all of the excess interest he collected, this amounts to nothing more than the defendant returning it after spending the criminal proceeds," adding that "even considering the principle of proportionality in discretionary confiscation and forfeiture, there is no illegality in the lower court's judgment ordering forfeiture of an amount equivalent to the full excess interest."
