Card and Capital Companies to Be Allowed to Issue ABS Based on Rental Assets

Financial Services Commission Announces Legislative Notice for Amendment to the Enforcement Decree of the Specialized Credit Finance Business Act

Going forward, specialized credit finance companies (specialized credit finance companies) such as card and capital companies will be able to raise funds by issuing asset-backed securities (ABS) for rental assets. In addition, virtual assets will be added to the list of prohibited card transactions, strengthening the prevention of foreign currency outflows and money laundering.

The Financial Services Commission announced on the 4th that it will give prior notice of the amendment to the Enforcement Decree of the Specialized Credit Finance Business Act, which includes these contents, until February 13.

So far, specialized credit finance companies have raised necessary funds through specialized credit finance bonds, as they do not have deposit functions. Under current laws, the securitizable assets of specialized credit finance companies are limited to assets related to their core businesses such as installment sales and leases, making asset securitization for rental assets difficult. As funding conditions worsened due to interest rate hikes, specialized credit finance companies have consistently raised the need for more diverse funding methods to the government. The amendment newly establishes the basis for allowing alternative funding methods such as asset securitization for rental assets of specialized credit finance companies. This is to enhance their ability to respond to market volatility and resolve difficulties related to fund procurement.

Virtual assets will be added to the list of prohibited card transactions. Domestic virtual asset exchanges are subject to the Act on Reporting and Using Specified Financial Transaction Information and can only conduct transactions between money and virtual assets through real-name verified deposit and withdrawal accounts. However, this regulation is difficult to apply to overseas virtual asset exchanges. As a result, illegal outflows of domestic funds, money laundering, and speculation have occurred through purchasing virtual assets with cards on overseas exchanges. From now on, virtual assets will be included in the list of prohibited card payments, along with stocks, financial investment products, gambling activities, and cashable products. This is to establish grounds for cooperation with international brand companies and strengthen the prevention of foreign currency outflows and money laundering.

The recharge limit for child meal prepaid cards will be raised from 500,000 won to 1,000,000 won. Under current laws, the maximum issuance amount for prepaid cards is 500,000 won, with exceptions only for registered prepaid cards (5,000,000 won) or support funds under the Framework Act on Disaster and Safety Management (3,000,000 won). However, as the unit price for child meals under the Child Welfare Act to prevent child hunger among low-income families has been steadily rising recently, cases where the maximum monthly support amount exceeds 500,000 won have occurred. To alleviate inconveniences such as recharging, the issuance limit for child meal prepaid cards has been increased.

The limit on economic benefits provided when recruiting new credit card members will be treated the same for both online and offline channels. Currently, the economic benefits that can be provided when recruiting new credit card members through offline channels are limited to 10% of the annual fee of the credit card. In contrast, recruitment through online channels can provide up to 100% of the annual fee. This has led to criticism that regulatory arbitrage occurs between online and offline recruitment channels. From now on, the economic benefits provided during new recruitment will be unified to 100% of the annual fee of the credit card.

After the prior notice period, this amendment is expected to be implemented within the first half of this year following review by the Office for Government Policy Coordination, the Deputy Ministers' Meeting, and the Cabinet Meeting.

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