Notice of Amendment to Loan Business Supervision Regulations: 'Grace Period for Cancellation of Excellent Loan Business Operator Designation'

If the Standard Falls Slightly Short, 'Expansion of Credit Supply for Low-Credit Borrowers' Plan May Be Deferred

System improvements are being pursued to allow a grace period for cancellation of selection even for companies that slightly fall short of the excellent loan business operator maintenance requirements, provided they submit a plan or pledge to expand credit supply to low-credit borrowers.

A flyer related to private loans is placed at a closed store in Myeongdong, Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

The Financial Services Commission announced that it will conduct a public notice of changes to the supervision regulations for loan businesses, including this content, until May 20. An excellent loan business operator refers to a government-authorized loan business operator that meets the loan requirements for low-credit borrowers (bottom 10% credit score), allowing them to borrow from banks.

Under the current system, even excellent loan business operators who wish to continue efforts to supply credit to low-credit borrowers can be uniformly disqualified for slightly failing to meet maintenance requirements, raising the need for improvement. There were also concerns that the amounts borrowed by excellent loan business operators from banks should be operated in accordance with the purpose of supplying credit to low-credit borrowers.

Accordingly, through the amendment, companies that slightly fall short of the excellent loan business operator maintenance requirements but submit a plan or pledge to expand credit supply to low-credit borrowers will be granted up to two opportunities to defer cancellation of their excellent loan business operator status.

Furthermore, companies whose excellent loan business operator status was canceled due to failure to meet requirements even after submitting a pledge will be able to be reselected if they faithfully improve and supplement their credit supply capabilities, with the related restriction period adjusted from the previous one year to three years.

Additionally, the reason for cancellation of excellent loan business operator status will be expanded to include "cases where the balance of personal credit loans to low-credit borrowers is less than the balance of bank borrowings," ensuring that bank borrowings are operated in line with the purpose of supplying credit to low-credit borrowers.

Meanwhile, the authorities will also revise related regulations to reduce the administrative burden of issuing and submitting documents during the loan business registration process. For documents required for loan business registration applications, such as the Certificate of All Corporate Registration Details (for corporations) and resident registration copies (for individuals), verification will be improved to allow confirmation through administrative information sharing instead of the previous paper submission.

The amendment to the supervision regulations for loan businesses is expected to be completed and promulgated in the second quarter, and will take effect from the date of promulgation. However, the revision of reasons for cancellation of excellent loan business operator status will be implemented six months later.

The financial authorities stated, "We will continue to encourage the financial sector to supply necessary funds to medium- and low-credit borrowers," and added, "We also plan to actively listen to and inspect difficulties faced by low-income and vulnerable groups in cooperation with related agencies."