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Debt, suicide, fraud: South Koreans hit by real estate fraud

For ten years, Park Hyeon-su lived in a windowless micro-apartment in Seoul, working double shifts and saving every penny for a down payment on a nice house. Then real estate scammers took his money.

The South Korean rental housing market has a unique system known as jeons in which tenants pay huge deposits – sometimes hundreds of thousands of dollars – and then live rent-free for years before getting all their money back when they move out.

The idea is that landlords get access to interest-free money for speculation, and tenants get free housing, with the property as collateral.

But the system is now full of fraud; police data shows that more than a billion dollars are lost to fraud every year.

The system once accounted for two-thirds of the rental market in the 1990s, but has declined in popularity, partly due to growing awareness of the risks.

Park said he often worked from 9 a.m. to midnight in delivery-related jobs to save $73,000. But after paying a deposit and moving in, his alleged landlord – who it turned out had never had the authority to rent the property – disappeared and Park was evicted, with no way to get his money back.

It wasn’t just cash, he said, but “my entire 20s and early 30s” that was stolen, and although legal proceedings are underway, it is highly unlikely he will receive restitution.

“My dream of owning a house has disappeared, and I have given up dating, not to mention getting married or having a child,” said Park, 37, who uses a pseudonym for his Jeonse activism to protect his privacy to protect.

Official data shows that at least 17,000 people like Park have been affected by youth fraud in recent years, and that around 70% of victims are between the ages of 20 and 30.

And activists say authorities are not doing enough to help victims or punish fraudsters, who often manage to hide and keep the money. The maximum penalty for fraud in South Korea is 15 years in prison.

Suicides

At least eight victims of the Jeonse scam have committed suicide, activists say.

Many renters take out bank loans to cover the huge deposit, with the intention of paying it back once they move in and the money is returned. But after they get scammed, they’re still on the hook with the banks.

South Korea’s parliament last year passed a special bill aimed at helping victims, with the Financial Services Commission offering interest-free loans that can be repaid within 20 years.

Bloomberg

But victims of the Jeonse scam say they won’t have to pay back the stolen bank loans at all — unless authorities get their deposits back from the fraudsters.

“Telling young people that they have to spend the next 20 years trying to pay back money lost to fraud is like telling them to stop living,” Ahn Sang-mi, a victim, said at a recent meeting in Seoul.

The other option is to pursue debt rehabilitation, which is a similar process to bankruptcy and wipes out some debt but has long-term effects on credit scores and is especially harmful to young people, activists say.

The government should not “stigmatize young people who are just starting their (adult) lives with the characteristic of bad credit,” said Jang Sun-hoon, a scam victim from Daejeon.

‘Jeon’s Hell’

Four years ago, Choi Jee-su, 33, used his savings plus a bank loan to move into a Jeonse apartment to escape life in a cockroach-infested dormitory.

But his apartment sold out from under him and the landlord disappeared with his deposit, leaving him saddled with debt.

To pay back his original bank loan, Choi took out high-interest credit card loans, sold his stocks, worked grueling shifts in restaurants and lived on cheap food to save money.

He spent days making delicious meals for customers, but “didn’t hesitate to buy one pack of instant noodles for himself.”

“I ended up choosing the cheaper pack of noodles, but I cried while eating it because it just tasted terrible,” said Choi, who wrote a book titled “Jeonse Hell.”

The Opposition Democratic Party has introduced a bill that would allow the state to reimburse tenants for deposits lost to fraud. But the government has backed down over concerns over costs, with Lands Minister Park Sang-woo saying young tenants may have been “playing fast and loose” when signing the contracts.

The National Assembly will vote on the bill on May 28.

Choi, who is now working on an LNG tanker to save money for pilot training – a dream scammer forced him to be put on hold – says the government must take action.

Jeon’s fraud destroys lives, he said: “Victims lose everything, (our) lives, dreams and joy are shattered.”

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