SEOUL, Aug. 14 (Korea Bizwire) — With worry that peer-to-peer (P2P) lending financial corporations are on their last legs continuing to grow, two P2P associations that are leading the industry have each come up with their own regulations to be announced within the month.
The Korea P2P Finance Association, a group that currently has 60 corporate members under its wing, and the Digital Finance Association Preparation Committee, which has come to play a pivotal role for lending to credit and small business owners, said each has nearly completed its own set of guidelines in order to prevent P2P-related entities from collapsing altogether as news of the high default rate by P2P giant Roof Funding, created by former employees of Goldman Sachs, has made ripples within the industry.
Critics are also saying that the government must also come up with guidelines and new laws to cope with the situation.
The new guidelines to be released by the Korea P2P Finance Association state that the total value of loans, loan balances and default rates must be announced by each company every month.
In addition, funds from investors must be deposited and entrusted to a third party.
Loan statements, according to the new guidelines, will be shared with NICE, a provider of credit information services, and KCE, a credit counseling service operator.
Requiring P2P entities to provide tellers to offer consultation to investors will also be advised.
The corporate members who left the Korea P2P Finance Association created the association tentatively called the Digital Finance Association Preparation Committee, which will be releasing its own set of guidelines.
At the core of the guidelines is limiting the financing ratio of real estate projects to 30 percent, which follows similar practices currently carried out by certain second tier banks and credit financial institutions.
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