SEOUL, Dec. 20 (Korea Bizwire) – Financial authorities will ramp up efforts to crack down on moneylenders targeting young people and seniors from next year.
According to the Financial Services Commission (FSC), a special task force will be launched as part of a joint effort with the Ministry of the Interior and the Seoul Metropolitan Government to increase monitoring of loan sharks.
The FSC is also poised to close loopholes, as moneylenders have been offering loans in installments to evade regulations.
The task force will seek to put an end to illegal financial conduct and hold moneylenders accountable, by abolishing a clause allowing borrowers to not disclose their income and debt records when the loan is less than 3 million won in the second quarter of next year.
The move is to ensure lenders assess the debtors’ ability for repayment, in order to prevent reckless loan issuance, as lenders in South Korea typically grow by relying heavily on loans of less than 3 million won for young people and seniors, which account for over 60 percent of all loans.
Against this backdrop, the task force will require lenders to ask those aged below 29 and those over 65 about their financial records, before extending the change to other age groups.
In addition to making financial background checks a requirement, the FSC will encourage lenders to establish their own credit scoring system (CSS) to weed out those who are likely to default.
Plans are also in consideration to make lenders to gradually offer debtors the right to ask for interest rate reductions.
Legal grounds to prevent lenders from making false and exaggerating advertisements will also be established.
Unethical conduct, such as promoting high-interest loans as low-interest loans, or not providing sufficient information for joint surety, will also be on top of the list for the new task force.
“We are tightening household debt management and ramping up monitoring efforts on lenders ahead of time, given the volatility of open market interest, which could prevent households with low credit from using financial services.