The Cabinet on Nov. 19 approved a bill on regulation of peer-to-peer loans in a bid to tackle deceptive P2P lending practices and protect consumers, officials said.
Under the regulation, which will take effective from August next year, all P2P lenders must have paid-in capital of more than 500 million won ($427,825) each and registration from financial regulators, the Financial Services Commission said in a statement.
In case of a nonregistered P2P lender, the lender’s operator will face a fine of less than 100 million won or a jail term of less than three years, the FSC said.
Also, state-registered P2P lenders must publicly disclose their financial information, the FSC said.
P2P lending is a new type of loan extended to individuals or businesses through social networks and the internet, covering a wide range of services, including loans to startups and self-employed businesspeople.
Outstanding P2P loans extended by 220 companies stood at 6.2 trillion won in June, compared with 4.7 trillion won at the end of last year, according to FSC data.
By Ram Garikipati and newswires (firstname.lastname@example.org)