The Secret Behind “Club Women Priority Loans”

Why Did You Lend to Me? 

(1) Complicity between the sex industry and the loan business

By Narang

Published: December 6, 2016

Translated by Hoyoung Moon

Friday evening at 8 o’clock, I visited the Teheranno area in Gangnam. It wasn’t difficult to find business cards printed with the words “Daily Installment Loans” on the streets lined with adult entertainment clubs, bars, and karaoke rooms.

“Daily installment loans: No credit check, priority given to business owners and club women”

“Immediate loans: Studio apartment deposit payment by proxy, day loans without collateral. Available to credit defaulters.”

What are these private lenders banking on when they offer such loans? They say they will provide same-day loans without collateral, even to credit defaulters. On top of this, they say they “give priority” to “(adult entertainment) club women”. Advertisements for such “women-first loans” also inundate online spaces. The ads guarantee confidentiality, urging readers to apply without hesitation.

On Friday evenings in Gangnam’s Teheranno, business cards advertising “daily installment loans”. © Ilda

People who have money and can afford collateral can receive loans from the “1^st financial sector”, i.e. banks. People who have been rejected at the banks must seek loans from the 2^nd financial sector (trust, credit card, and capital companies), the 3^rd financial sector (private lending companies), or loan sharks. The interest rates get higher as you move toward the latter.

A high interest rate means that the amount of money one must repay increases. But how do loan companies expect to collect loans made to women without jobs or income? Since the advertisements say that women can receive loans more easily, it can even seem as though being a woman is an advantage.

Last year, on October 27^th, activists from the anti-prostitution action group E-loom conducted a public awareness campaign near Gangnam Station. The title of the campaign was “Lending is debt collection! Why did you lend to me?”

E-loom activists distributed ppeongiyo snacks[1] and yogurt drinks with a straw. The ppeongiyo snacks represented the lies of the private lenders, and the straw drinks symbolized the way that ‘plundering finance’ sucks life and money from women. Activist Yuna spoke about the background of this campaign.

“There are about 3,900 offline offices of loan companies just in Seoul, and among these, about 1,200 are in Gangnam and Seocho. When we placed a dot on the map for each office, what we saw was similar to the distribution of adult entertainment clubs in the city. Why are the loan companies and the adult entertainment clubs concentrated in the same areas? We thought, whether it’s the 2^nd or 3^rd financial sector or illegal private lenders, these companies are not nonprofit organizations—they must want to lend to poor women (in the sex trade) because they have something they can ‘bank on’. What are the private lenders counting on when they offer these loans? We wanted the public to start asking this question.”

On October 27^th, near Gangnam station, anti-prostitution human rights activists from E-loom conducting the “Lending is debt collection! Why did you lend to me?” campaign. © Ilda

The case of 22-year-old Dayeon, who worked part-time at an adult entertainment bar

Twenty-two-year-old Dayeon (pseudonym, female) dreamed of going to college. To be able to focus on studying for the university entrance exam for a year, she needed to save money. Dayeon went from one part-time job to another, but on minimum wage, she could not save money no matter how much she worked. Then, she saw an advertisement for an adult entertainment bar on the part-time employment website she frequented. It said you could make a lot of money in a short period of time. Dayeon called the number in the ad.

The ‘madam’ of the bar said, “We don’t force employees to go to the second round [euphemism for doing sex work] here. Come and try working for us.” Upon hearing that she wouldn’t have to go to the second round, Dayeon decided to work there, telling herself she would grit her teeth for just 6 months and make money.

Because she had to find housing near the bar, she needed about 8 million won (approx. 7,383 USD) for the one-room apartment’s deposit, as well as for her immediate living costs, the clothes she would wear at work, and late fees for her cell phone. The madam said that it would be hard for Dayeon to borrow a large sum of money in a single loan since she didn’t have a job or collateral, so she told Dayeon to get loans of about 2 to 3 million won from three loan companies she recommended. Eight million won was an overwhelmingly large amount of money, but Dayeon calculated that if she paid back about 100,000 won (approx. 93 USD) every day, she would be able to repay the whole debt in three months. For the three months after that, she would just save money.

However, Dayeon’s employer charged her a penalty of 200,000 won (approx. 186 USD) when she took a day off because of menstrual cramps, and 300,000 won (approx. 279 USD) when she took a weekend off to visit her parents. When she purchased some cosmetics and clothing from the door-to-door seller the madam recommended, some more hundreds of thousands of won were added to her debt.

Two weeks after beginning work at the bar, Dayeon realized that she could never repay her debt unless she went on second rounds. It seemed that women who had started working at the bar before her had also started without doing second rounds but began to go in order to repay their debt. There was even a woman who would work 7 or 8 second rounds a day.

But because she was too scared to do second rounds, Dayeon simply stopped going to work. She did not receive any calls from the madam, but the loan companies sent her dozens of texts each day demanding repayment. They even threatened her by saying, “Sell your body if that’s what you have to do to repay the debt,” and, “We will notify your parents.” When Dayeon filled out the promissory note at the loan companies, she had written down her resident number and her home address. It was only a matter of time until the loan sharks came to her house.

Lacking a place to turn to for help, Dayeon searched online. She found a center that gave free financial counseling, and received online counseling from it. The counselor said, “In order to apply for debt rehabilitation as an individual, you will have to be able to give up a certain percentage of your income for 5 years, so you need to find a stable job first.” When Dayeon asked if she couldn’t apply for bankruptcy, she was told, “In cases where the debt is less than 30 million won, the court tends to reject the petition for bankruptcy; your debt amount is too small to apply.” Was she, then, supposed to get into further debt?

The counselor said, “The loan company that you borrowed from charged you an interest rate of 250%, which is 10 times the legal maximum of 25%,” and suggested that Dayeon go to the police. However, Dayeon ultimately could not bring herself to divulge the fact that she had worked in an adult entertainment bar.

(※ The case above is a composite based on stories collected by the Counseling Center for Women Victims of Prostitution.)

Secret 1: The Intimate Collusion between the Sex Industry and the Private Lenders

A mock advertisement parodying
women-priority loan brochures.
© Produced by E-loom

Translation of text:

Women’s Loans

Trust and Reliability? No such thing!

Low interest? 27.9% is low?!

Easy and quick loans? 
Difficult, backbreaking repayments

Credit defaulters welcome? How?

Service visits? Harassment visits

Private lender: someone whose expression after lending is completely different from before

In 2004, the Act on the Punishment of Acts of Arranging Sexual Traffic (hereafter the “Sexual Traffic Punishment Act”) was enacted. Article 10 of this act states that prostitution-related debt that a person who arranges prostitution holds over an individual that has or will engage in the act of prostitution is invalid regardless of the format or the purpose of the relevant contract. In other words, the ‘advance payment’ which the pimp (arranger) gives women under the premise that they will engage in prostitution is illegal debt, and if women can prove this is the nature of their debt they do not have to repay it.

Activists who provide counseling and support to women in the sex trade say that after the Sexual Traffic Punishment Act was established, the sex industry “morphed in diverse and cunning ways in order to make an advance payment not look like an advance payment, a brothel not a brothel, and pimping not pimping” (Son Jeong-a, Director of Nuteenamoo Women’s Rights Support and Counseling Center, “The Economic Chains that Prevent Women in Prostitution from Quitting”, Women and Human Rights, First Half of 2016 [Volume 15], Women’s Human Rights Institute of Korea).

One of those ways is the method shown above in Dayeon’s case, where the pimp does not directly give a woman the advance payment but has her take out a loan from a private lender. In many cases, the brothel has their own designated private lender. The loan company or loan shark can deny responsibility by simply saying, “We didn’t know the borrower was in prostitution; we only lent her the money.” The de-facto advance payment becomes ‘personal debt’ which seems to have nothing to do with prostitution.

In these situations where it is unclear whom to hold responsible, the initial loan amount and the high interest one must repay one way or another becomes the reason that women cannot help but continue working in prostitution.

E-loom activist Yuna says, “In places like provincial teahouses or massage parlors, the business owner may still be the one giving the advance payment, but overall, it’s increasingly more often the case that the creditor on the documents is not the brothel owner.” Instead, the brothel owner introduces the woman to a private lender or a loan shark, or uses the name of a third party on the documents. Though this money is in actuality an illegal advance payment for prostitution, Yuna emphasizes that it that was possible to transfer to a system in which people who seem to be outside of the sex industry are the lenders because “there are no restrictions on the loan industry”.

Son Jeong-a, director of Nuteenamoo Women’s Rights Support and Counseling Center also disclosed in Volume 15 of Women and Human Rights (First Half of 2016) that “It was too easy to transition from the business owners directly giving women advance payments to a method that conceals the advance as individual debt, because Korea, which is known as ‘lender’s heaven’, has a huge loan market where lenders are hunting for prey.”

In Korea, the “Act on Registration of Credit Business, etc. and Protection of Finance Users” (hereafter “the Credit Business Act”) was passed in 2002. Since one could now legally open a loan business through a simple registration process, and did not need to receive a permit from the government, private lenders began to thrive. At the moment, registered loan companies must abide by a maximum interest rate of 27.9% per year, and unregistered companies 25% per year. At one point, however, the legal maximum interest that loan companies could charge was 66% per year (from 2002 to 2007)—no wonder Korea has also been called the ‘heaven of the loan industry’.

However, it is rare for the loan companies to be penalized even when they charge an interest rate higher than the legal upper limit. According to the “Status Report on Sentencing for Loan Industry Violations”, which National Assembly member Kim Jin-tae of the Saenuri Party ordered as a member of the assembly’s Legislation & Judiciary Committee last October, 4,624 individuals violated the Loan Business Act in the past five years (from January 2012 to June 2016). However, only 171 individuals, or 3.6% of the total, received prison time. In 52% of cases, the perpetrators were charged a fine, and 28.6% were put on probation.

Young women are easy prey for private lenders who are aware that in Korean society, women’s bodies are easily exchanged for money through the sex trade. On top of this, it is difficult for women in prostitution to sue loan companies or loan sharks even when they charge illegal, high interest. Add to this the fact that even when lenders are caught by the law, they are only punished lightly—to private lenders, ‘club women loans’ basically exist in a lawless zone.

This is the first secret hidden behind the ‘club women priority loans’.

Secret 2: It is easy to pressure women in the sex trade for repayment

Another secret of the ‘club women priority loans’ has to do with how confident the lenders are about collecting the debt, however large the sum, because the borrowers are women—especially women in the sex trade. In fact, the lenders explicitly say, “It’s easier to pressure them into payment because they are women.”

“Loan sharks or credit information companies (debt collection companies) explicitly take advantage of the fact that women are in a vulnerable position in society when they collect the debt. Because women tend to be physically weak, it’s true that when they are cursed at over the phone or threatened physically, they are not able to respond very well. There was also an actual case in which the lender went to the borrower’s mother and told her that her daughter was working in the sex industry. Even the mention of notifying parents or family members becomes a great threat. The need for confidentiality itself becomes a weakness.” (Yuna, E-loom activist)

This photo is definitely not related to
the content of the article. © Ilda

Pimps and loan sharks know very well that women in the sex trade are isolated, without resources, and socially stigmatized. Thus, they pressure women in the sex industry through collection methods that cross the line between legal and illegal.

At even the mention of outing them as sex workers, women “seek alternatives such as moving to a different workplace with worse conditions but a higher advance payment, or going to a different loan shark who collects the scattered loans into one (therefore lending them a larger sum of money). This pushes women into more dangerous and difficult situations”. (Son Jeong-a, Director of Nuteenamoo Women’s Rights Support and Counseling Center)

Women who cannot repay their debt are repeatedly harassed by the loan companies or sued in civil court. There was even a case in which a woman who had cleared her debt years ago but did not receive the promissory note afterward received repayment demands again because the document got into the hands of a debt collection company. In this way, women in the sex industry are accused of economic crimes by pimps, private lenders, and debt collectors, and the governmental authorities are not on their side either.

“When a woman in the sex trade is under interrogation as an economic criminal, it is difficult for her to be seen as a victim of prostitution. The police say, ‘Isn’t it ridiculous that you borrowed money but only worked for 3 days? If you borrowed money, you should pay it back.’ As long as the woman is a debtor, she simply becomes a criminal, whether she was working in the sex trade voluntarily or was forced to do so. This is because the public authorities are on the side of the creditors.” (Yuna)

The Harmful Effect of ‘Plundering Finance’ that Targets Poor Women

In their book Plundering Financial Society (Bookie, 2012), authors Je Yoon-kyeong and Lee Heon-wook describe ‘plundering finance’ in the following way.

“When one buys stock or real estate, the predominant idea is that the investor must take responsibility for the risk in investment. (…) (In the same way,) finance must operate under the basic premise of lending to borrowers who have the ability to repay the principal and interest. If they lend to someone who cannot repay the debt, that is an attempt to gain profit in a different way. Behavior that does not take the repayment capabilities of the borrower into consideration and seeks profit through different means—such as high interest, excessive debt collection, high fees, and executing collateral rights—can only be described as plundering.”

The activists at E-loom say that they wanted to point out the problematic nature of precisely this ‘plundering finance’, which targets women in the sex trade as its prey. Before saying “You should pay what you owe if you borrowed money”, the activists say we should pose the critical question, “Why did you lend that money?”

What these private lenders bank on when they lend to poor women who do not have the ability to repay their debt is the idea that women will surely repay their debt even if they must sell their bodies, and the sex industry which sells women’s bodies is always booming in Korea.

E-loom activists point out that “this is not simply a problem some women in prostitution face, but one connected with the issue of women’s poverty”.

“I don’t think that prostituted women in the sex industry are the only ones that become the prey of plundering finance. The reason that private lenders advertise ‘women priority loans’ and say that ‘any woman can get a loan’ is because they believe that any woman, if she cannot repay her debt, can make money by entering the sex industry. I want to emphasize that women’s loans are absolutely not ‘prioritizing’ women but the symbol of women’s poverty.” (Yuna)

Resources: Joohee Kim, “Financialization of Korea’s sex industry and the ‘securitization’ process of women’s bodies”, Ph.D. thesis, Ewha Womans University, 2014

* Original article: http://ildaro.com/sub_read.html?uid=7687&section=sc1&section2=%BC%BA%B8%C5%B8%C5

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[1] Puffed grain snacks, or ppeongtuigi have the same sound as the Korean word ppeong, which means “bluff”. “Ppeongiyo” is the sound of the snack vendor announcing that the snacks are being made or sold, and can also mean “that’s a bluff”.