Starting on the 30th of this month, if a business loan is used for purposes other than those intended, such as purchasing dwellings, the borrower's (the person who took out the loan) information will be shared across the financial sector and the borrower will be barred from taking out loans for up to five years.
According to the financial sector on the 23rd, the Korea Credit Information Services will roll out a system on the 30th of this month to share information on borrowers who violated agreements by misusing business loans for purposes other than intended. Five financial sectors are covered: banks, insurers, mutual finance institutions, specialized credit finance companies, and savings banks.
These financial companies must check within three months whether a borrower used funds as intended when handling business loans of 100 million won or more. If misuse for other purposes is detected, they must recall the loan and register the borrower's information with the credit information agency.
When handling future business loans, financial companies must check the centralized list at the credit information agency of borrowers caught misusing funds for other purposes. If business funds are found to have been used for other purposes, a first offense results in a one-year borrowing ban, and a second offense results in a five-year ban across the five financial sectors. The five sectors are revising codes of conduct and internal rules for system implementation.
The financial authorities and the National Tax Service have launched a probe into the financial sector following President Lee Jae-myung's order for a full review of misuse of business loans for other purposes. The financial authorities are said to have ordered a full review of business loan usage at major commercial banks covering the past 10 years. The National Tax Service also plans to conduct inspections of business loans across all financial sectors.
Earlier, the president called for strong measures, including criminal punishment, against borrowers who used business loans to purchase real estate. On the 17th, the president said on the social media platform X, "If you deceive a financial institution by claiming funds are for business and then use the loan to buy real estate, you face criminal punishment for fraud. The Financial Supervisory Service and the National Tax Service can jointly conduct a full investigation, file criminal complaints for fraud, and recover the loan principal."
According to data the Financial Supervisory Service (FSS) submitted to Rep. Park Sang-hyuk of the Democratic Party of Korea, inspections of misuse of individual business loans across all financial sectors from July to December last year uncovered a total of 127 cases (58.75 billion won).