SEOUL, March 30 (Yonhap) – South Korea’s financial authorities on Monday announced that they had finalized the rules for enforcing peer-to-peer (P2P) loans ahead of the implementation of a related law in August.
The rules allow individuals to invest up to 30 million won ($ 24,700) to lend to those in need of loans and 10 million won for mortgage products.
P2P lending refers to a new type of loans given to individuals or businesses through social media and internet services, covering a wide range of services, including loans to startups and independent businessmen.
The limit on individual loans has been lowered from the original 50 million won amid growing concerns over delinquent and toxic loans in the wake of the coronavirus outbreak, authorities said.
The rapidly spreading disease has hit small businesses and the self-employed here as consumers are advised to stay home in line with the government’s efforts to contain the outbreak.
P2P companies will also be required to publicly disclose financial information, including any financial incidents, default rates of 15% or more, and bad debt sales. They will also be prohibited from selling high risk instruments.
In November last year, the Cabinet approved a P2P regulatory bill aimed at tackling deceptive P2P lending practices and protecting consumers.
P2P loans outstanding by 242 companies stood at 2.3 trillion won as of March 18, compared with 6.2 trillion won in June last year. Their delinquency rate rose to 15.8% on March 18, compared to 11.4% at the end of 2019.