On-to-law's First Company Delayed Repeatedly... Industry Shrinks

Disciplinary Confirmation Delayed, OnTuBeop No.1 Also in the Dark with No News
Authorities "Deciding as Soon as Possible, Difficult Within April"
P2P Industry Sees Increasing Closure Reports and Soaring Delinquency Rates

[Asia Economy Reporter Song Seung-seop] Despite about eight months having passed since the Online Investment-Linked Finance Act (OnTu Act) came into effect, concerns are growing as there has been no news of the selection of the first P2P (peer-to-peer) company. This is due to the overall increase in the industry's delinquency rates and growing investor anxiety. Signs of discord between the Financial Services Commission and the Financial Supervisory Service over task handling have also been detected.

According to financial authorities and the industry on the 26th, currently six P2P companies are awaiting the Financial Supervisory Service's registration review results under the OnTu Act. These companies completed preliminary reviews through consultations with the Financial Supervisory Service before submitting documents. The first registration application was submitted on September 14 of last year.

The OnTu Act stipulates that companies wishing to operate P2P businesses must have a minimum capital of 500 million KRW and appoint a compliance officer. They must also have a business plan and conflict of interest prevention mechanisms. Companies that fail to complete registration by August 26 must operate as loan businesses rather than P2P businesses.

The delay in decisions is analyzed to stem from issues in reviewing P2P companies that violated the statutory maximum interest rate regulations. Currently, the Financial Services Commission is considering disciplinary measures for some P2P companies separately from the registration review. These companies exceeded the statutory maximum interest rate of 24% when combining platform fees and loan interest. The Financial Supervisory Service has imposed business suspension penalties ranging from 3 to 6 months.

The Financial Services Commission requested a legal interpretation from the Ministry of Government Legislation on whether platform fees received by P2P companies can be considered interest before finalizing the Financial Supervisory Service's sanctions. Although this procedure usually takes 2 to 3 months, they judged it necessary to clarify the matter thoroughly.

Ministry of Government Legislation Rejects Legal Interpretation Request... Industry Shrinks and Investor Anxiety Grows Due to Delays

However, on the 9th, the Ministry of Government Legislation rejected the request, placing the Financial Services Commission in a position to make its own decision. A Ministry official did not specify a clear reason for the rejection but explained, "We do not oversee disputes over factual recognition rather than statutory interpretation." This suggests that the delay was caused by requesting a matter outside the Ministry's jurisdiction.

The Financial Services Commission stated, "We had some internal judgments before requesting the Ministry's interpretation," and added, "Regardless of disciplinary measures, the Financial Supervisory Service may announce the first company first." However, regarding the sanction decision, they forecast, "It seems difficult to finalize within this month."

On the other hand, the Financial Supervisory Service insists that the Financial Services Commission's sanction results should come first. A Financial Supervisory Service official explained, "Currently, the Financial Services Commission is judging the sanction issues," and "We are preparing so that registered companies can be selected as soon as the results come out." They also lamented, "Employees feel considerable pressure about the registration deadline, and with only a few months left, the process needs to proceed quickly."

As time delays continue, the P2P industry's concerns deepen. A representative of a P2P company that completed formal registration explained, "In our case, we found points to improve through consultations with the Financial Supervisory Service, but latecomers are in a tight time situation." Currently, eight P2P companies have only submitted documents before formal registration. Unlike the six companies that completed formal registration, they have not undergone a lengthy process to address deficiencies. There are concerns that if mistakes are found during registration, they may be disqualified due to insufficient time.

While the decision on the first OnTu Act company is delayed, the P2P industry's average delinquency and closure rates continue to rise. According to the P2P financial company disclosure site Midrate, the number of target companies as of this day is 104, down by 35 from a year ago. During this period, the average delinquency rate surged from 15.77% to 22.65%.

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