The Challenges Facing Jeong Seong-woong, the Nominee for Chairman of the Troubled Private Loan Industry Association

The Korea Credit Finance Association, representing private lenders, has nominated Jeong Seong-ung, Vice President of Korea Credit Data, as the next association president. However, evaluations suggest that numerous immediate challenges remain to improve the industry’s conditions both inside and outside the association. The general meeting, which requires the attendance of more than 800 member companies, is also regarded as the ‘final hurdle.’

According to the financial sector on the 14th, the Korea Credit Finance Association has nominated Vice President Jeong as the sole candidate. A total of nine people applied for the presidency, and after the first screening, three candidates were selected. Subsequently, the Presidential Candidate Recommendation Committee unanimously endorsed Vice President Jeong as the final candidate.

Nominee Jeong graduated from Chung-Ang University with a degree in economics and entered the financial sector in 1989 by joining the Credit Management Fund. He joined the Financial Supervisory Service at its establishment in 1999 and served as Deputy Director of Financial Consumer Protection. In 2021, he served as Vice President of Korea Enterprise Data, among other roles.

Jung Sung-woong, Vice President of Korea Evaluation Data / Photo by Kang Jin-hyung aymsdream@

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As a financial expert with 30 years of experience, Jeong’s top priority is improving the profitability of the private lending industry. The statutory maximum interest rate was capped at 20% per annum in 2021, down from 24%, but funding costs continue to rise, causing many lending companies to go out of business one after another. Even Rush & Cash, a major player in private lending, ceased operations in October last year.

In response, the Financial Services Commission and the Financial Supervisory Service plan to announce a legislative notice in the first quarter of this year to revise supervisory regulations related to the excellent private lender system for low-income financial consumers. The excellent private lender system is designed to encourage expanded credit supply to low-income groups by allowing private lenders who meet certain criteria, such as lending to low-credit borrowers, to borrow from banks. Until now, the private lending industry has procured funds from secondary financial institutions such as savings banks.

However, the banking sector’s response has been lukewarm. Commercial banks are reluctant to lend to private lenders due to concerns about being stigmatized as ‘private lending intermediaries.’ Industry insiders evaluate that banks providing corporate loans, such as the Industrial Bank of Korea, should first lend to private lenders to encourage other commercial banks to follow suit.

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It is also necessary to shed the negative image attached to the private lending industry. Although private lending was incorporated into the regulated financial sector in 2013, the stereotype of viewing private lenders as loan sharks remains ongoing. The Private Lending Business Act stipulates that only registered private lenders can use the term ‘Daebu’ (private lending), but some illegal private financiers also use the ‘Daebu’ name.

Therefore, there is a proposal to allow excellent private lenders to change their names. In 2021, Park Soo-young, a member of the People Power Party, proposed an amendment to the Private Lending Business Act to allow excellent private lenders to use the term ‘Consumer Credit’ instead of ‘Daebu’ (private lending).

Enhancing the association’s transparency is also urgent. On the 23rd of last month, financial authorities issued institutional warnings and management advisories to the Credit Finance Association and issued a disciplinary warning to President Lim Seung-bo. This was because the association obstructed an on-site inspection by the Financial Supervisory Service in September 2022 by refusing to submit documents such as corporate card usage details and board meeting minutes. According to the Financial Services Commission, the association and President Lim repeatedly violated reporting obligations even after changing regulations related to their work.

Jeong’s immediate challenge is to pass the general meeting. The final election can only be confirmed through a vote at the general meeting attended by all member companies. At least 33% of member companies must attend for the meeting to be held, and more than half of those present must vote in favor for election. An industry insider said, “There are more than 2,500 member companies in the association, but most have little interest in the next president’s appointment.” Ten private lending companies stated in a phone call that they “do not plan to attend the general meeting.” An association official explained, “It will be difficult, but we are currently collecting proxy votes at the association level.”

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