Going forward, the fixed business site requirement for lend business registration will be tightened, and the loophole practice in which multiple lend companies avoided submitting documents through split loans will be blocked.
The Financial Services Commission said on the 1st it will give advance notice of legislation for a revision to the Enforcement Decree of the Act on Registration of Credit Business and Protection of Finance Users that includes these measures. The revision is a follow-up to the illegal private lending eradication plan released in December last year, focusing on strengthening requirements for registered lend businesses and managing credit information.
First, the requirement for a fixed business site eligible for lend business registration will be strengthened. In the market, many engaged in loophole practices by renting shared offices to easily obtain a lend business registration certificate and then transferring or selling it to illegal private lenders.
In response, the Financial Services Commission (FSC) decided to reject lend business registrations when shared offices, dwellings, and other locations where actual operations are impossible are registered as offices. Locations already in use as a fixed business site by another lend company are also excluded. Split loans, in which multiple lend companies divided amounts to avoid the obligation to collect income and liability proof documents, will also be blocked.
Under the current act, the obligation to collect income proof documents is waived for small loans of up to 1 million won for young adults and older adults, and up to 3 million won for other users. Some lend companies exploited this by partnering with other firms to split loan amounts to users and evade regulation.
To block these loophole practices, the Financial Services Commission (FSC) will strengthen the credit information management system. When companies determine whether documents can be waived, the standard has been revised so they must add together not only existing lend balances and the amount of the new loan application, but also any amounts borrowed from other lend companies in the past seven days.
In addition, the list of agencies that can request the suspension of phone numbers used for illegal private lending will be expanded. Provincial police commissioners and local police stations will also be able to directly request number suspensions from the Ministry of Science and ICT to respond quickly. After public notice of legislation on the 2nd, the revision will undergo review by the Ministry of Government Legislation and other procedures before being implemented as soon as possible.