Supervision over loan brokerage platforms increases

The government has confirmed that it will consider having the Financial Supervisory Service (FSS) directly supervise online loan brokerage platforms that have been identified as a "nexus" of illegal loans. Politicians and the government are pushing to amend the law to retrieve the interest and the principal amount of illegal loans if detected. They will also discuss raising the registration threshold so that not just anyone can set up a lending company.

"We are considering changing the supervisory body of loan brokerage platforms from local governments to the Financial Supervisory Service," a financial authority official said on Thursday. The Financial Services Commission and the Financial Supervisory Service have been discussing measures to eradicate illegal loans with the Korea Finance Consumer Loan Association and loan industry experts in the 'Task Force on Improvement of the Loan Industry System.' They have decided to hasten the strengthening of platform supervision.

About 30 platforms in operation display advertisements for officially registered lenders. All platforms are registered with local governments as ‘loan brokers’ and are subject to local government management and supervision. The FSS has indirectly supported supervision by dispatching personnel from time to time. However, since local governments have few personnel with expertise in supervising the loan brokerage business, they have not been able to monitor the business closely, and the platforms have often been linking consumers to illegal loans. In response, the FSS has decided to directly oversee these platforms.

Separately, the FSS has decided to conduct joint inspections in the second half of this year, starting with Gyeonggi Province, where large platform companies are concentrated. In May last year, it detected cases of illegal loan shark advertisements and personal information leaks through joint inspections. However, it is conducting a re-inspection after more than a year since it was pointed out that the problem persists.

The government is also preparing to amend the law to invalidate illegal lending contracts. The law guarantees the principal and statutory interest (20 percent per year) even if the lending is penalized as illegal. The ruling and opposition parties are united on this issue.

The Dong-A Ilbo’s Hero Content Team exposed the reality of illegal loan shark groups hiding on the platform through the series "Trap: Caught in the Money Trap" from June 24-28.


Ho-Kyeong Kim kimhk@donga.com