The Financial Supervisory Service will launch on-site inspections of the lend industry for about three months to root out predatory finance. It will also inspect online lend brokerage sites with the Gyeonggi-do Special Judicial Police Unit.
On the 7th, the Financial Supervisory Service (FSS) said it will conduct on-site inspections of lenders and online lend brokerage sites from the 8th to Aug. 28. It plans to eradicate predatory financial practices targeting low-income and vulnerable people, such as illegal debt collection, violations of the maximum interest rate, and links to illegal private lending, and to strictly punish any illegal acts found.
Inspection cases include illegal collection practices such as "zombie debt collection" that never ends and "social stigma collection" that pressures people around the borrower, as well as cases of violating the maximum interest rate such as "bait loans" disguised as ability-to-repay assessments or "trick loans" that reduce principal but increase interest.
The Financial Supervisory Service (FSS) plans to jointly check with the Gyeonggi-do Special Judicial Police Unit cases in which online lend brokerage sites are linked to illegal private lending. Inspection targets will be selected after comprehensively considering civil complaints and past inspection histories. The FSS tentatively plans to inspect about 10 companies.
The backdrop to this inspection is the decision that, as low-credit and low-income citizens and vulnerable groups have been pushed out of first-tier financial institutions such as banks, users of the lend industry have turned to an uptrend for the first time in five years. From the end of June 2021, the number of lend users compiled every half-year had continued to decline, but as of the end of June last year it turned to an increase (9,000 people).
The Financial Supervisory Service (FSS) said that in recent inspections of lenders, it found cases exploiting borrowers' lack of legal knowledge, and that in inspections of online lend brokerage sites, there have been cases where, after a loan inquiry, users are connected to illegal private lenders, raising concerns about consumer harm.
Previous inspections were limited to registered lenders. This time, by jointly inspecting online lend brokerage sites with the Gyeonggi-do Special Judicial Police Unit, the plan is to trace the channels through which vulnerable groups are exposed to illegal private lending and to inspect both registered and unregistered entities.
The Financial Supervisory Service (FSS) emphasized that if violations are uncovered as a result of the inspection, it will take stern action in accordance with relevant laws and regulations, prioritize borrower protection, and work with the special judicial police to close gaps between the supervision and inspection of registered lenders and criminal investigations into illegal private lending.