FSC Eases Rental Limits, a 'Long-Sought' Change for Specialized Credit Finance Companies

Mandatory PG Assessments by Card Companies
Tighter Limits on Real Estate Lending

On the 23rd, the government announced a draft amendment to regulations that would ease limits on rental business operations, a long-standing request of specialized credit finance companies.

The Financial Services Commission (FSC) said it would invite public comment on the proposed amendment to the Regulations on Supervision of Specialized Credit Finance Business, which covers these measures, from today through December 2. The measures reflect issues discussed at a meeting between FSC Chairman Lee Eogwon and CEOs of specialized credit finance companies in November last year.

First, the FSC will rationalize limits on rental business operations by specialized credit finance companies.

Currently, these companies may operate rental businesses only if the average balance of their total rental assets during a quarter remains within the average balance of their total lease assets. The average balance of rental assets for each item is also separately capped at the average balance of the corresponding lease assets.

The FSC will ease the overall limit on rental business operations to the combined amount of lease assets and installment financing assets, and abolish the per-item limit.

However, the measure prohibiting small and mid-sized businesses from entering the short-term rental market will remain in place.

Specialized credit finance companies that offer rental products will also work to build a cooperative framework in the rental market for small and mid-sized rental car companies with limited access to funding. Measures will include ▲expanding credit lines ▲deferring repayment of loan principal and ▲connecting these companies with short-term rental demand, such as demand for maintenance services and replacement vehicles after accidents.

The FSC also announced measures to tighten regulations, including ▲strengthening limits on real estate-related loans by specialized credit finance companies and ▲requiring card companies to assess payment gateway (PG) providers.

Currently, real estate project financing (PF) loans by specialized credit finance companies are subject to a limit of 30% of their credit assets. However, unlike other financial sectors such as savings banks and mutual finance institutions, there are no separate limits by industry for real estate-related lending.

The FSC will introduce a limit of 30% of credit assets for each of these categories: loans to the real estate sector and loans to the construction sector. It will also set a combined limit of 50% for real estate PF loans and loans to the real estate and construction sectors.

The FSC will also require card companies to assess PG providers. It determined that a systematic payment risk management framework is needed as card payment processing transactions conducted online through PG providers have recently increased.

Card companies will be required to assess various payment risks, including unsettled transactions and illegal transactions by PG providers, when signing or renewing contracts with them and once every quarter during the contract term. They must take necessary measures based on the results of their assessments and inspections, including not entering into or renewing contracts, or terminating them early.

The FSC will invite public comment on the proposed amendment through December 2. After the comment period, it plans to complete the amendment by the first quarter of next year, following review by the Regulatory Rationalization Committee and a resolution by the Financial Services Commission.

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