Lawsuit for Confirmation of Non-Existence of Debt | A District Court Judgment Holding That a Loan Arising from a Smishing Crime Need Not Be Repaid

The plaintiff who filed the lawsuit for confirmation of non-existence of debt was A, a victim of a smishing crime.

A opened a mobile wedding invitation sent by an unidentified person and thereby fell victim to a smishing offense in which a malicious application was installed on the mobile phone.

The unidentified person stole the personal and financial information stored on A's mobile phone, then activated a mobile phone and opened an account in A's name.

After that, the person installed a banking application on the mobile phone activated in A's name and, after completing identity authentication and account authentication, obtained a loan of 81.5 million won.

In addition, the person applied for and received a loan of 9.5 million won against the whole life insurance policy that A had subscribed to, and even canceled A's housing subscription savings to withdraw 11.79 million won, which was then transferred to another account.

A, after reporting these facts to the police, filed a lawsuit against the banks and the insurer for confirmation of non-existence of debt and for the return of the amounts lost, asserting that they had failed to fulfill their identity verification measures and their duty to prevent the harm.

The banks and the insurer rebutted, stating, "Under the Act on Real Name Financial Transactions, we have no obligation to carry out identity verification measures, and even if such an obligation exists, all of the transactions are valid because we fully carried out the identity verification measures required under the relevant statutes." They further argued that A was also negligent in failing to securely manage the account password and the like.

The District Court that heard the lawsuit for confirmation of non-existence of debt accepted A's arguments.

The court held that in electronic financial transactions conducted through electronic documents, and particularly in transactions carried out on a non-face-to-face basis, a financial company must fulfill its duty of care to prevent incidents.

The court found that a financial company whose principal business is non-face-to-face financial transactions should have reinforced its identity verification methods, such as by having the customer photograph the real-name verification document so that the customer's face is directly shown, or by using a method such as a video call.

The court further held that this offense was a case in which a loophole in the non-face-to-face real-name verification method had been exploited, and that the banks' and the insurer's conduct of carrying out identity verification through only an additional ARS authentication procedure, which has little effectiveness as authentication, could not be regarded as having taken sufficient measures.

Accordingly, it found that no debt existed with respect to the amounts loaned in A's name.

We have analyzed a District Court judgment holding that, in a lawsuit for confirmation of non-existence of debt, the financial institutions bore responsibility for the tens of millions of won in loans that arose through a smishing crime, so the loans need not be repaid.

Recently, financial institutions have been making non-face-to-face loan services easier and simplifying their previously demanding loan procedures.

While this simplification of loans offers consumers convenience, it has also produced the side effect of an increase in crimes that exploit it to misappropriate another person's identity and defraud them of money.

If you have become a victim of such loan fraud, you may be able to escape liability as a debtor through a lawsuit for confirmation of non-existence of debt.

That said, because the process of proving that you are a victim of a crime can be complex, it may be advisable to seek the assistance of an attorney experienced in such matters.

The 🔗Civil and Damages Group of Daeryun Law Firm LLP actively assists clients in lawsuits seeking to have the non-existence of debt confirmed.

If you need assistance in this regard, you are welcome to visit Daeryun Law Firm LLP at any time.