[Asia Economy Reporter Kim Hyo-jin] To operate an online investment-linked finance (P2P finance) business, one must meet the minimum capital ratio requirements according to the loan scale and register with the financial authorities.
The Financial Services Commission announced on the 27th that it will publicly notify the enforcement decree of the Act on Online Investment-Linked Finance Business and User Protection (P2P Finance Act), which includes these provisions. The P2P Finance Act will take effect on August 27.
The enforcement decree stipulates the minimum capital requirements necessary for registration based on the scale of linked loans.
If the balance of linked loan receivables is 100 billion KRW or more, a minimum capital of 3 billion KRW must be held; if it is between 30 billion KRW and less than 100 billion KRW, 1 billion KRW; and if less than 30 billion KRW, 500 million KRW must be held as minimum capital.
After registration, at least 70% of the minimum capital must be maintained. For example, if the minimum capital at registration was 1 billion KRW, at least 700 million KRW must be maintained.
The enforcement decree also limits the linked loans by a P2P finance operator to the same borrower to the smaller of 7% of the loan receivables balance or 7 billion KRW.
Credit finance institutions are allowed to make linked investments within 40% of the loan amount. Real estate-related loan products are permitted within 20%.
P2P finance operators must also charge fees based on the information disclosed on their online platforms.
The fees are included in the maximum interest rate set by the Loan Business Act (24%). Costs such as collateral registration fees, credit inquiry fees, 1% of early repayment amounts, and other incidental costs related to loan contract execution and repayment, which are determined by public notice considering the characteristics of the product, are excluded.
Linked investments made on own account must raise at least 80% of the loan amount, and it is prohibited to guarantee users that own-account linked investments will be made or to recover principal and interest preferentially over other investors.
It is also prohibited to promise investors in advance to compensate for losses or to compensate for losses afterward.
For certain products such as project financing (PF) or secured products, it is stipulated that investors must be provided with prior information for a certain period before raising investment funds.
According to the financial authorities, as of the end of last year, there were 239 domestic P2P companies, with cumulative loan amounts of approximately 8.6 trillion KRW and loan balances of 2.4 trillion KRW, continuously increasing since 2015.
The financial authorities plan to establish the Online Investment-Linked Finance Association composed of the Financial Supervisory Service, the P2P industry, and external experts, and to select a central record management institution in line with this trend.
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