Requirements for fixed business locations will be strengthened for lending business registrations, and illegal practices where multiple lenders evade documentation requirements through split loans will be blocked.
The Financial Services Commission (FSC) announced on Wednesday (July 1) that it is pre-announcing an amendment to the Enforcement Decree of the Act on Registration of Credit Business and Protection of Finance Users.
This amendment is a follow-up measure to the "Measures to Eradicate Illegal Private Financing" announced by the government last December, focusing on strengthening lending business registration requirements and credit information management.
First, the requirements for fixed business locations eligible for lending business registration will be tightened.
Previously, there were many cases of circumventing regulations where individuals would easily obtain a lending business registration certificate by renting shared offices, only to transfer or sell them to illegal private lenders.
In response, the FSC has decided to reject lending business registrations if the office is located in a shared office or residential property where actual business operations are not feasible.
Locations already being used as fixed business sites by other lending businesses will also be excluded.
The practice of "split loans," where multiple lending businesses provide loans in portions to evade the obligation to collect income and debt verification documents, will also be blocked.
Under the current Lending Business Act, the obligation to collect income verification documents is waived for small loans of 1 million won or less for youth and the elderly, and 3 million won or less for other users.
Some lending businesses have been abusing this by coordinating with other firms to split loan amounts for users, thereby bypassing regulations.
To block these circumventing practices, the FSC is strengthening the credit information management system.
Going forward, when a business determines whether a borrower is exempt from submitting verification documents, it must aggregate not only the existing loan balance and the new loan application amount but also any loans received from other lending businesses within the past seven days.
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The amendment will be pre-announced on Thursday (July 2) and is expected to be implemented promptly following reviews by the Ministry of Government Legislation.
The FSC stated, "We will provide guidance so that the lending industry can meet the strengthened registration requirements by the 22nd of this month," adding, "We will continue to strive to prevent damages from illegal private financing through the pan-governmental task force to eradicate illegal private financing."
(Photo: Provided by the Financial Services Commission, Yonhap News)