P2P Industry Faces Mass Closures Amid Legal P2P Association Launch Efforts

Despite Numerous Issues in the P2P Industry, Association Launch Accelerates
Delays Expected if Review Prolonged Due to Insufficient Data

Illustration by Youngwoo Lee 20wo@

[Asia Economy Reporter Song Seung-seop] The online investment-linked finance (P2P) industry is facing a crisis of mass closures due to violations of the Loan Business Act, and a legal association representing the industry is set to launch as early as next month.

According to the industry on the 29th, the Korea P2P Finance Association, which had served as the industry's association, has effectively entered the liquidation phase after disclosing management information last month. This is to form an association centered on P2P companies officially included in the system following the enforcement of the Online Investment-Linked Finance Act (OnTu Act).

The related tasks are being handled by the "Online Investment-Linked Finance Association Establishment Promotion Team," established in February last year. The promotion team holds the view that once the Financial Supervisory Service's review results are announced as scheduled in February, there is no reason to wait until the registration application deadline stipulated by the OnTu Act at the end of August. A promotion team official said, "The enforcement of the law and registration procedures have been delayed more than expected," but added, "Although the schedule is not fixed, the formal legal association can be launched as soon as companies that pass the review emerge."

Possibility of Association Launch Soon After the First P2P Company Emerges

Currently, the P2P industry is struggling with platform fee issues. Six companies that exceeded the statutory maximum interest rate (24%) when combining platform fees and interest rates received 3 to 6 months of business suspension from the Financial Supervisory Service for violating the Loan Business Act. If the Financial Services Commission finalizes this disposition, those companies will be unable to apply for P2P business registration according to regulations. Only five companies have completed registration applications, so it is uncertain how many companies will emerge.

Nevertheless, the promotion team's haste to launch the association is analyzed to be aimed at minimizing the gap period without an association for several months even after the first P2P company appears. According to the OnTu Act, P2P companies are required to join the association, and the association is also responsible for tasks related to the deposit of reserves to fulfill P2P companies' liability for compensation. The later the association is established, the more likely P2P companies will face difficulties in carrying out various tasks.

However, if there are setbacks in the Financial Authorities' review process due to insufficient documents or other reasons, launching the association in February seems difficult. When a P2P company applies for registration, the financial authorities must announce the results within two months, but the time for requesting document supplementation is excluded. P2P companies that have been confirmed to receive business suspension for violating the Loan Business Act or fail to meet conditions for registration must also go through the procedure of refunding the contributions submitted to the promotion team, which may take considerable time before the association is formed.

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