P2P construction loan disclosure strengthenedConstruction-related projects raising money through peer-to-peer (P2P) services must now disclose more information, including financial statements, past performance, previous loans and repayment plans.
Until now, a project only had to disclose the progress of construction, whether the P2P borrower invested personally in the project and how the borrowed money was to be spent.
The project also needs to make outside evaluations available on real estate, including those determining the collateral value of the land and the buildings. These disclosures have to be made public for at least 48 hours so investors will have time to closely review the information before committing funds.
On Tuesday, the Financial Services Commission (FSC) released the guidelines on P2P loans. Designed to protect investors, they will be effective for one year starting Jan. 1.
According to the FSC, P2P loans as of the end of the third quarter amounted to roughly 4.3 trillion won ($3.8 billion), up from 3.7 trillion won at the end of June. The P2P loan market has been growing at an alarming rate. At the end of 2015, the loans totalled 37.3 billion won.
Incidents of fraud and embezzlement in the P2P business have been reported, with investors facing massive losses.
Payments overdue more than 30 days have gone up from 1.24 percent at the end of 2016 to 5.4 percent in the third quarter of this year.
“We plan legislation on P2P loans in order to foster the growth of the business into a major fintech industry,” said Kwon Dae-young, head of the FSC’s financial innovation bureau. “But as it takes time to develop legislation, we have reformed the guidelines to strengthen the protection of investors.”
Also under the new guidelines, full details of the proposed opportunity and the potential risks must be disclosed in P2P advertisements on platforms such as Kakao Pay or Samsung Pay. The project must also disclose overdue payments, specifically those relating to unsecured loans.
BY LEE HO-JEONG [firstname.lastname@example.org]