Assemblyman Kim Hee-gon Introduces Amendment to the Loan Business Act
Establishes Provisions for Institutional Warnings and Cautions
No Business Suspension for Minor Violations
There is a prospect that small-scale lending companies with minor violations of the Debt Collection Act may avoid 'business suspension.' This comes as a bill is being promoted to allow relatively lower-level sanctions such as institutional warnings and institutional cautions.
According to the National Assembly and financial circles on the 7th, Kim Hee-gon, a member of the National Assembly's Political Affairs Committee from the People Power Party, introduced the "Amendment to the Loan Business Act" (Partial Amendment to the Act on Registration of Loan Business, etc. and Protection of Financial Consumers) as the main proposer on the 22nd of last month.
The core of the amendment to the Loan Business Act is to allow imposing institutional warnings and institutional cautions on lending companies that violate the Debt Collection Act. Under the current law, it is possible to cancel registration or suspend business operations (within one year) for violating companies, but there is no legal basis for weaker sanctions such as institutional warnings or cautions, making them impossible. As a result, even minor violations such as computer errors or employee mistakes have led to business suspensions, making it difficult to impose reasonable administrative sanctions. There have been continuous calls to align the degree of violation with the level of sanctions.
If the amendment passes, the lending industry will be able to avoid excessive sanctions relative to the degree of violation. A representative from the lending industry said, "There is a need for relaxation considering regulatory fairness with other industries." Additionally, amid concerns that the window for urgent loans for ordinary citizens has been blocked as lending companies have successively stopped loans due to profitability deterioration caused by the statutory maximum interest rate regulation, it is expected that the amendment will have the effect of reducing some cases of business suspension among lending companies. Representative Kim explained, "If the law is amended, it is expected that the fairness and effectiveness of administrative sanctions will increase, and problems of unreasonable regulations will be resolved."
The current amendment to the Loan Business Act also includes provisions to impose personal sanctions such as caution, warning, and disciplinary action on executives and employees of lending companies. Until now, there was no legal basis for punishing executives and employees.
While the process of gathering opinions from related ministries on this bill is underway, the Financial Services Commission holds a positive stance. A Financial Services Commission official said, "There is a consensus that appropriate levels of punishment should be implemented."
A National Assembly Political Affairs Committee official said, "Although this is not a contentious bill, many bills are scheduled to be processed by the end of this year, so it remains to be seen whether it will pass within the year."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
