[P2P Selection] Establishing an Information Management Control Tower... Will Poor-Quality Companies Close One After Another? (Comprehensive)

P2P Legal Framework 'OnTu Law' Enforced Today
Financial Services Commission Announces Application for Central Record Management Institution
Concerns Over Investor Losses Amid Successive Business Closures

[Asia Economy Reporters Hyojin Kim and Minyoung Kim] The Online Investment-Linked Finance Act (OnTu Act), which establishes the legal basis for peer-to-peer (P2P) lending, came into effect on the 27th. Going forward, P2P companies must meet minimum capital requirements and personnel and physical facility standards, and disclosure obligations will be strengthened. Financial authorities have begun establishing an information control tower to closely manage P2P finance.

Market analysts predict that stricter regulations will inevitably lead to a wave of closures among insolvent companies. If many companies shut down, it could result in investors not being repaid. In fact, the delinquency rate of the industry’s top company is approaching 20%, indicating a deteriorating market situation.

According to financial authorities, the Financial Services Commission announced an application notice on the same day for the 'Central Record Management Institution for P2P Finance' to systematically manage information related to P2P finance. The Central Record Management Institution will be responsible for ▲ centralized management of P2P finance-related information ▲ management of investment limits linked to P2P finance ▲ providing information on linked investments and linked loans to P2P companies, among other roles.

Judging the management of P2P finance and P2P companies to be urgent, the financial authorities plan to complete the written review, presentation evaluation, and final selection process by next month. Applications are accepted from today until the 9th of next month.

Accelerating P2P Management Systematization
Selection of Management Institution to be Completed Next Month

To operate a P2P business, companies must meet registration requirements such as minimum capital and register with the Financial Services Commission. Operating without registration may result in imprisonment for up to three years or a fine of up to 100 million KRW. Existing P2P companies are granted a one-year grace period for registration.

In cases of financial accidents or when the delinquency rate exceeds 15%, companies are required to disclose the information. In short, this aims to separate the wheat from the chaff in the P2P finance industry.

Investment limits are also imposed. The limit for linked loans to the same borrower is capped at 7% of the outstanding linked loan receivables, up to 7 billion KRW. The individual investment limit for all P2P finance is 30 million KRW (10 million KRW for real estate-related investments), and for income-qualified investors, the limit is set at 100 million KRW for all P2P investments.

Especially if the delinquency rate exceeds 20%, companies must prepare and report management plans. Financial authorities plan to focus on managing the soundness of P2P companies, including delinquency rates, through the OnTu Act and the Central Record Management Institution. According to the P2P finance statistics site Midrate, the average delinquency rate among 138 P2P companies is 16.37%.

Soundness Deteriorating... Average Delinquency Rate of 138 Companies at 16.37%
Industry Leader Terra Funding’s Delinquency Rate Also at 19.62%

Among these, 21 companies have delinquency rates exceeding 15%. The industry leader Terra Funding’s delinquency rate has reached 19.62%, reflecting the overall worsening soundness. Eight companies, including Deo Joeun Fund and Loop Funding, have disclosed a 100% delinquency rate, meaning they have effectively ceased operations such as loan receivables collection. The amount of investment funds that these eight companies have failed to return to investors amounts to 89 billion KRW.

Meanwhile, a full audit report survey conducted by financial authorities on P2P companies revealed very low participation. By the previous day, about 240 companies were required to submit audit reports on loan receivables, but only about 20 companies, roughly 10%, had submitted them.

An industry insider said, "Since the financial authorities have stated that companies that do not submit audit reports or fail to receive a qualified opinion will be denied registration, a wave of closures is expected." Accordingly, concerns are rising that the exit of insolvent companies could lead to significant investor losses.

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