Big money lenders are scrapping a joint liability system from next month, financial sources said Friday, to fall in line with the regulator’s efforts to reform the outdated lending practice and prevent a chain of defaults.

Five major money lenders, including A&P Financial Co. which owns top player Rush N Cash, have decided to abolish the joint surety system on fresh loans from July 1, according to the companies and the Financial Services Commission, the financial watchdog.

A joint surety states that the obligation to repay debts incurred by the principal borrower falls upon the other party who cosigned the loan contract in the event that the principal borrower defaults.

Since it imputes the debt liability to the surety, the system has been blamed for spawning a chain of defaults even on those who did not actually borrow the money. (Yonhap News)