The government insists that it is necessary for the lenders to offer such information to the Korea Federation of Banks, or KFB, if they hope to step into the second-tier banking industry, but lenders raised concerns about the side-effects, such as the exposure of sensitive customer information.
Earlier this month, the regulatory Financial Services Commission made a legislative preannouncement that the customer information for large-sized lenders will be collected and managed by the KFB.
Companies refusing to abide by these new rules will be banned from collecting personal information such as resident registration numbers in the future, according to government officials.
“Once the reinforced personal information protection law takes effect in August, private entities will be prohibited from collecting resident registration numbers if they fail to submit the data they already have,” explained an official of the Financial Supervisory Service, one of the government’s financial watchdog units.
“Financial institutions such as banks are exempted from this ban, but private lenders are not because the loans they provide are classified as interindividual monetary transactions, he added.
This is why the lenders’ customer database is managed by NICE Rating, a private credit assessment firm, and not the federation overlooking the banking sector ― the KFB.
According to the revised act, the KFB will attain direct access to the personal information of people who took out loans from private lenders.
The private loan industry voiced collective concern about the move.
“The personal information, especially of those who covertly took loans from private lenders, is a highly sensitive issue,” said an official of the Consumer Loan Finance Association. “They may be denied new loans or other financial benefits from banks, due to their past loan records once their data is passed on to the government.”
The FSC has said that the information would be transferred exclusively to the KFB, and that it would not be available for other financial organizations. But this policy is susceptible to changes, the FSC said.
Some lenders were willing to make the compromise as they can make a choice between agreeing to submit their database and gain a wider business operation range, or keep their database from the authorities and become limited in the data they collect in the future.
But in reality, it would become impossible for creditors to initiate collection procedures, such as provisional seizures and auctions, without the detailed personal information of those who took out the loans, meaning most of the private lenders would be forced to bite the bullet and hand their lists over to the KFB, industry watchers said.
As of the end of last year, the number of private loan customers reached 2.5 million, according to the FSS data.
By Bae Hyun-jung (firstname.lastname@example.org)