1.

Clarification of the Definition of Credit Business (Article 2, Paragraph 1 of the Amended Credit Business Act) and Enhancement of Registration Requirements (Article 3-5 of the Amended Credit Business Act)

Under the former Credit Business Act, “credit business” refers to activities involving (i) lending money, or (ii) collecting receivables arising from loan agreements assigned by credit service providers or credit financial institutions. The amended Credit Business Act redefines this as “operating a business continuously or repeatedly for the purpose of earning profits.” However, according to court precedents and other legal interpretations, profitability and repetitiveness were already required elements for recognizing an activity as “operating a business” under the former Credit Business Act. Therefore, the amendment is understood primarily as a clarification of the existing definition.

Additionally, the registration requirements for credit businesses have been partially strengthened, with the minimum paid-in capital raised from KRW 10 million to KRW 100 million for individuals, and from KRW 50 million to KRW 300 million for corporations. Furthermore, under the amended Credit Business Act, the minimum paid-in capital must be maintained at all times throughout the registration period.
 

2.

New Provision on Invalidation and Cancellation of Loan Agreements Executed Through Anti-Social Acts or Means (Article 8-2 of the Amended Credit Business Act and Article 5-2 of the Enforcement Decree of the Same Act)

In the event a loan agreement is executed through anti-social acts or means, as described below, such agreement shall be deemed null and void and, in such case, the credit service provider, credit financial institution, and illegal private financing entity (collectively referred to as the “Credit Providers”) cannot demand repayment of the principal or interest from the counterparty (i.e., credit users).
 

(1)

Where an anti-social act is perpetrated as a condition for lending, such as demanding or collecting sexually exploitative materials or involvement in human trafficking;

(2)

Where anti-social methods, including assault, threats, or intimidation, are used during the execution of the loan agreement;

(3)

Where the loan agreement contains provisions that violate relevant sections of the Fair Debt Collection Practices Act (e.g., prohibitions against contacting related parties, violence, threats, etc.); and

(4)

Where the annual loan interest rate exceeds 60%.
 

(1)

Where the loan agreement is executed through misrepresenting itself as a credit financial institution or similar entity;

(2)

Where a credit service provider or an illegal private financing entity fails to provide the loan agreement or related documents containing mandatory information; and

(3)

Where the section of the loan agreement requiring handwritten details, as stipulated by the Credit Business Act, is falsely completed. 
 

3.

Nullification of Interest Agreements on Loans Provided by Illegal Private Financing Entities (Article 11 of the Amended Credit Business Act)

Under the former Credit Business Act, any agreement to receive interest exceeding the annual rate of 20% was deemed invalid, and any excess interest paid was credited to the principal repayment. However, the amended Credit Business Act stipulates that when an illegal private financing entity issues a loan, (i) any agreement concerning interest shall be deemed null and void, and (ii) the provision for claiming statutory interest at a rate of 6% per annum under the Commercial Act is expressly excluded. As such, under the amended Credit Business Act, for any loans made by illegal private financing entities, the lender cannot claim interest or other delay penalty payment other than repayment of the principal amount.
 

4.

Strengthening of Criminal Penalties (Article 19 of the Amended Credit Business Act)

The criminal penalties for operating unregistered credit businesses have been significantly increased. The maximum sentence has been raised from imprisonment of up to five years or a criminal fine of up to KRW 50 million, to imprisonment of up to ten years or a criminal fine of up to KRW 500 million. Additionally, criminal penalties for violations of interest rate restrictions have been elevated from imprisonment of up to three years or a criminal fine of up to KRW 30 million, to imprisonment of up to five years or a criminal fine of up to KRW 200 million.
 

5.

Other Amendments

Additionally, other amendments have been introduced, including the requisite paid-in capital and its maintenance requirement for those intending to engage solely in loan brokerage business. Furthermore, loan brokers are now required to inform credit service users of important cautions, such as the risks associated with illegal private financing.