P2P Individual Investment Limit Reduced to 10 Million Won... Full Survey of Companies Also Conducted

Individual Investment Limit Set at 10 Million KRW... Real Estate Investments Capped at 5 Million KRW
Prohibition on Investor Recruitment via Fintech Platforms to Take Effect from the 27th of Next Month

[Asia Economy Reporter Kim Hyo-jin] Starting from the 27th of next month, the investment limit for individual investors in online investment-linked loans (P2P loans) will be halved. High-risk products handled by P2P loan companies will be prohibited, and unhealthy business practices such as rolling over loans will also be restricted. A full-scale survey of approximately 240 P2P companies is also planned to be conducted soon.

The Financial Services Commission and the Financial Supervisory Service announced on the 20th that they will revise the "P2P Loan Guidelines" in line with the enforcement of the "Online Investment-Linked Finance Business and User Protection Act (P2P Act)".

The P2P Act is scheduled to be enforced from the 27th of next month, but companies operating P2P businesses will be granted a one-year registration grace period before enforcement. The purpose of this grace period is to allow existing P2P companies to smoothly proceed with the registration process under the new law without any operational gaps during the registration review period.

To prevent potential financial consumer damages during this period, the financial authorities decided to revise the guidelines. Accordingly, the handling of P2P loans and investment products secured by assets such as loan receivables and principal and interest collection rights will be restricted. P2P loans to moneylenders or special purpose corporations will also be limited.

The loan limit for the same borrower is set as the smaller amount between 7% of the loan receivables balance of the respective company and 7 billion KRW.

The investment limit for general individual investors has been lowered from 20 million KRW to 10 million KRW per company, and the investment limit related to real estate has been reduced from 10 million KRW to 5 million KRW.

Additionally, the financial authorities set the maturity, interest rate, and amount of investment products and the loans executed with the funds raised through those investment products to be consistent, aiming to restrict unhealthy business practices such as rolling over loans.

Furthermore, acts of unfairly favoring or discriminating against specific investors in relation to borrower information provision and investor recruitment, as well as providing or receiving excessive financial benefits to or from investors, are prohibited.

It is also forbidden to promise in advance or compensate afterward for investment losses or profits.

The financial authorities recommend that investors check investment-related information from P2P companies before investing and require that methods for investors to access product information on P2P companies’ websites be provided.

Recruiting investors through other platforms is also prohibited. The management of investment funds is restricted to institutions such as banks, and deposited investment funds cannot be offset or seized by third parties, nor can they be transferred or used as collateral, thereby strengthening the management function of investment funds.

The revised guidelines will undergo a prior notice period from the 21st of this month to the 11th of next month and will be enforced from the 27th of next month until August 26 of the following year.

The financial authorities will also conduct a full-scale survey of about 240 P2P companies by analyzing audit reports from accounting firms on loan receivables. To this end, the Financial Supervisory Service sent official letters to companies earlier this month requesting submission of audit reports related to loan receivables.

Based on the investigation, the financial authorities plan to conduct registration reviews only for qualified companies, while unqualified companies or those that fail to submit inspection materials will be subject to on-site inspections followed by conversion to moneylending businesses or closure measures.

This content was produced with the assistance of AI translation services.