Supreme Court: "Loan Brokerage by Non-Profit Corporations Should Be Subject to the Loan Business Act"

[Asia Economy Reporter Bae Kyunghwan] The Supreme Court has ruled that even if one is not a loan company, if they mediate or arrange loans, they can be punished for unregistered loan brokerage.

On the 2nd, the Supreme Court's First Division (Presiding Justice No Taeak) announced that it overturned the original sentence of 1 year and 10 months imprisonment given to Mr. A, a special audit committee member of the General Assembly Pension Foundation of the Presbyterian Church of Korea, who was indicted on charges of breach of trust, violations of the Capital Markets Act and the Loan Business Act, and remanded the case to the Daegu District Court.

Mr. A, an insurance planner, managed the assets of pastors belonging to a foundation operated by a church. During this process, he and a friend found places wanting to borrow money from the foundation, persuaded the foundation's directors to approve the loans, and collected commissions. However, they were prosecuted for not registering as loan brokers with local governments.

The first trial sentenced Mr. A to 2 years and 6 months imprisonment and ordered the confiscation of approximately 1.78 billion won in criminal proceeds. His friend was sentenced to 1 year and 4 months imprisonment with a 3-year probation.

They appealed, and the second trial court ruled that since the General Assembly Pension Foundation, a non-profit corporation, made loans within the scope of its articles of incorporation, it did not constitute loan brokerage under the Loan Business Act. Therefore, the court acquitted Mr. A and his friend of violating the Loan Business Act. Based on the judgment that the acts did not legally fall under loan business, Mr. A's sentence was reduced to 1 year and 10 months imprisonment, and Mr. B received 8 months imprisonment with 2 years probation.

However, the Supreme Court stated, "Even if the loan act is excluded from the scope of 'loan business' under the Loan Business Act, as long as the transaction mediated is a money loan, the mediation itself should be considered loan brokerage." The court added, "The lower court should have examined whether Mr. A's work constituted loan brokerage and whether the commission was compensation for loan brokerage," and thus remanded the case.

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