Financial Supervisory Service Issues Strict Warning on Illegal Business Owner Loans by Savings Banks

Overview of Work Loan Occurrence.

[Asia Economy Reporter Song Seung-seop] The Financial Supervisory Service (FSS) has issued a stern warning to crack down on illegal business mortgage loan practices emerging in the savings bank industry.

On the 21st, the FSS stated, “During inspections, we confirmed numerous cases where loan manipulation organizations were involved, falsifying documents to improperly handle business mortgage loans,” adding, “In future on-site inspections of savings banks and loan solicitors, we will focus on the appropriateness of business mortgage loan handling and impose strict sanctions if laws are violated.”

Business mortgage loans have been rapidly increasing in savings banks, which are relatively less regulated, due to tightened household loan regulations in the banking sector. Related loans surged from 5.7 trillion KRW at the end of 2018 to 12.4 trillion KRW as of the end of March.

During this process, it is known that organizations composed of loan solicitors frequently attempt to approach financially struggling consumers through advertisements such as flyers or internet cafes. They use methods that involve falsifying necessary loan documents like estimates or tax invoices to disguise the loans as legitimate.

The FSS emphasized, “Savings banks need to thoroughly conduct credit screening and post-management when handling business mortgage loans to prevent such manipulated loans,” and “Loan solicitors must comply with legal procedures to avoid violating relevant laws during their solicitation activities.”

Financial consumers should also be cautious when using loans with the help of loan solicitors to avoid unexpected disadvantages. Those involved in manipulated loans may face criminal penalties of up to five years imprisonment or fines up to 10 million KRW, not just as victims but as accomplices. If registered as financial disorder offenders, they may face restrictions on financial transactions such as opening deposit accounts or suffer disadvantages in employment.

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