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ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

Act No. 6706, Aug. 26, 2002

Amended by Act No. 7428, Mar. 31, 2005

Act No. 7523, May 31, 2005

Act No. 8700, Dec. 21, 2007

Act No. 8852, Feb. 29, 2008

Act No. 8863, Feb. 29, 2008

Article 1 (Purpose)

The purpose of this Act is to provide for the matters necessary in the registration and supervision of credit businesses, preclude credit service providers and credit financial institutions from conducting illegal activities in collection of their claims, regulate their interest rates in order to promote the sound development of credit business, to protect users of financial services and to contribute for the safe economic lives of the public. Article 2 (Definitions)

The definitions of the terms used in this Act are as follows:

1. The term "credit business" means a business that engages in the service of lending money or acting as a broker for such service (including brokerage for delivery of money and offering and receiving money by bill discount, transfer of property for security, or any other similar way; hereinafter referred to as "loan"): Provided, That the case provided for by the Presidential Decree considering the nature of loan shall be excluded; and

2. The term "credit financial institution" means a financial institution that engages in the credit business with an authorization, permission, etc. under any other Act and its subordinate statute. Article 3 (Registration)

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(1) A person who desires to engage in the credit business (excluding the credit financial institutions) shall register each of his/her business offices with the Special City Mayor or a Metropolitan City Mayor or a Do Governor (hereinafter referred to as the "Mayor/Do Governor") having administrative jurisdiction over the business office.

(2) A person, who desires to make the registration under the provisions of paragraph (1), shall file an application stating the following information therein with the Mayor/Do Governor:

1. Trade name or the applicant's personal name and address;

2. Names and addresses of the largest investor and directors, if the applicant is a legal entity;

3. Name and address of an employee, if the applicant is a natural person and there is an employee authorized to control all affairs of the business;

4. Name and location of the business office (including all business offices, if there are more than one business office established); and

5. Specific description and business method of the credit business which the applicant intends to run.

(3) The Mayor/Do Governor shall, upon receiving an application for registration under the provisions of paragraph (2) or an application for renewal of registration under the provisions of paragraph (6), make an entry of the information prescribed in each subparagraph of paragraph (2) along with the date of registration (or the date of renewal for renewal of registration) and the registration number in the register and issue a registration certificate to the applicant without delay.

(4) The Mayor/Do Governor shall make the register under the provisions of paragraph (3) available to the general public for inspection. (5) The registration under the provisions of paragraph (1) shall be effective for three years from the date of registration.

(6) A person, who desires to engage in the credit business continuously after the effective term of the registration under the provisions of paragraph (5), shall file an application for renewal of the registration with the Mayor/Do Governor at least one month before the expiration of the effective term.

(7) More specific procedure for the registration and renewal of the ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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registration under the provisionss of paragraphs (1) and (6) shall be prescribed by the Presidential Decree.

Article 4 (Restrictions on Registration)

A person who falls under any of the following subparagraphs (referring to an executive officer or director who falls under any of the following subparagraphs, if the applicant is a legal entity) shall not apply for the registration of credit business:

1. A minor or a person declared incompetent or quasi-incompetent;

2. A person declared bankrupt and not reinstated yet;

3. A person in whose case five years have not passed since his/her imprisonment without labor or heavier punishment sentenced by a court was completely executed (including a case where it is deemed such sentence has been completely executed), or exempted from being executed;

4. A person who is under the suspension of the execution of imprisonment without labor or heavier punishment;

5. A person who is under the suspension of sentence of imprisonment without labor or heavier punishment;

6. A person in whose case two years have not passed since he/she was sentenced to the punishment by a fine upon conviction of the violation of any provisions of the following statutes:

(a) This Act;

(b) Article 257 (1), 260 (1), 276 (1), 283 (1), 319, 350, or 366 of the Criminal Act (applicable only where claim collection is involved); (c) The Punishment of Violences, etc. Act (applicable only where claim collection is involved); or

(d) Article 32 (1) or (2) 8 of the Use and Protection of Credit Information Act; or

7. A person in whose case five years have not passed since the revocation of registration under the provisions of Article 13 (2) was disposed of against him/her (including an executive officer or director directly responsible for the ground of such revocation, if the person against whom the revocation of registration was disposed of is a legal entity). Article 5 (Registration of Changes, etc.)

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(1) A person who has completed the registration of his/her credit business under the provisions of Article 3 (hereinafter referred to as a "credit service provider") shall file for the registration of change with the Mayor/Do Governor within fifteen days, whenever there occurs a change in any description set forth in paragraph (2) of the said Article. (2) A person who closes down his/her business shall report it to the Mayor/Do Governor as prescribed by the Presidential Decree. Article 5-2 (Prohibition of Title Lending, etc.)

A credit service provider may not allow another person to engage in credit business in his/her name, or lend his/her registration certificate for such business.

[This Article Newly Inserted by Act No. 7523, May 31, 2005] Article 6 (Execution of Loan Agreement, etc.)

(1) A credit service provider shall, upon the execution of a loan agreement (including a guarantee agreement related to a loan agreement; the same shall apply hereinafter) with its opposite contractual party (including a guarantor where a guarantee agreement is made in relation to a loan agreement; the same shall apply hereinafter), deliver the agreement with the following descriptions to the opposite contractual party:

1. Trade or personal names and addresses of the credit service provider and the opposite contractual party involved;

2. Date of agreement;

3. Amount of loan;

4. Loan interest rates (including the converted rate into the interest rate per annum);

5. Term and method for repayment;

6. Bank account number designated for the repayment of loan, if any;

7. All expenses incidental to the corresponding transaction;

8. Terms and conditions concerning amount of damages or forced execution, if any;

9. Details of guarantee agreement, if any;

10. Terms and conditions concerning earlier repayment of obligations; and

11. Other necessary matters as prescribed by the Presidential Decree for the protection of the opposite contractual parties of the credit service provider.

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(2) A credit service provider shall, upon the execution of the loan agreement under the provisions of paragraph (1), preserve the agreement and documents related to the agreement as prescribed by the Presidential Decree for two years from the execution date of the agreement.

Article 7 (Prohibition of Excessive Loan)

A credit service provider shall not enter into an agreement for the loan exceeding the capacity for repayment, considering the financial capacity, credit, current status of debts, and repayment plan of the person who wants to execute the loan agreement.

Article 8 (Restrictions on Interest Rates)

(1) A credit service provider shall not lend a loan to a small corporation as defined by the Presidential Decree at an interest rate exceeding the rate prescribed by the Presidential Decree within the limit of sixty percent per annum. (2) In calculating the interest rate under the provisions of paragraph (1), what the credit service provider receives in connection with a loan such as a gratitude, rebate, fee, deduction, overdue interests, advance interests and whatsoever it is called shall be deemed to be interests: Provided, That the foregoing shall not apply to the expenses incidental to the execution of the corresponding transaction and repayment as prescribed by the Presidential Decree. (3) If a credit service provider executes a loan agreement in violation of the provisions of paragraph (1), the provisions of the agreement for the interest exceeding the interest rate specified in the provisions of paragraph (1) shall be void, and thus the debtor may request the refund of the interest excessively paid already.

Article 9 (Public Notice of Terms and Conditions of Loan, etc.) (1) A credit service provider shall post a public notice of the loan interest rate, the interest computation method, the repayment method, and other important information as prescribed by the Presidential Decree in each of its business offices so that the general public can have knowledge about them, and shall explain the terms and conditions to its opposite contractual ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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party at the time when a loan agreement is executed. (2) An indication or advertisement made by a credit service provider concerning its terms and conditions of loan (referring to the indication or advertisement as defined in the Act on Fair Indication and Advertisement; hereinafter referred to as "advertisement") shall include the following information:

1. Trade name or its representative's name;

2. Registration number of credit business;

3. Loan interest rates (including the rate converted into the interest rate per annum) and overdue interest rates;

4. Details of expenses additional to interests, if any; and

5. Other necessary matters as prescribed by the Presidential Decree for protection of opposite contractual parties of the credit service provider. Article 9-2 (Prohibition of Advertisement for Credit Business) No person other than credit service providers and credit financial institutions may make an advertisement for credit business.

[This Article Newly Inserted by Act No. 7523, May 31, 2005] Article 10 (Prohibition of Unlawful Conducts for Claim Collection, etc.) (1) A credit service provider or a credit financial institution (including a person to whom a right to claim under a loan agreement has been assigned or transferred, or claim collection has been commissioned by a credit service provider or a credit financial institution, and a person to whom the aforesaid right to claim has been re-assigned or re-transferred, or such claim collection has been re-commissioned by the afore-said person; the same shall apply hereinafter) shall not use any of the following methods in performing claim collection under the loan agreement:

1. Method of committing violence, threat, arrest, or detention or applying a fraudulent scheme or force;

2. Method of informing false information about obligations to a debtor (including a guarantor, if any; the same shall apply hereinafter) or his/her related person (which refers to a person who cohabits with a debtor or whose livelihood is dependent upon a debtor or vice versa, a debtor's relative, or a person who works together with a debtor in one workplace; the same shall apply hereinafter);

3. Method of making the facts related to obligations known to any person other than the debtor concerned through a demand for the repayment ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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of such obligations by sending a postcard; or

4. Method of causing a debtor or his/her related person to feel fear or apprehension by committing any of the following acts to inflict a serious harm upon peace in his/her privacy or business:

(a) An act of causing words, written or oral, a visual image, or an article to reach a debtor or his/her related person; or

(b) An act of paying a visit to a debtor or his/her related person without a justifiable reason; or

(c) An act of forcing a debtor to raise the fund for repaying his/her debt by borrowing money or using other similar means; or (d) An act of forcing a person related with a debtor to repay the latter's debt.

(2) A credit service provider or a credit financial institution shall not inquire a debtor's related person about the debtor's whereabout or other information for the purpose of claim collection, unless it is hard to locate the debtor's whereabout because it is not possible to contact the debtor otherwise. Even where it is allowed to inquire about the debtor's whereabout, the facts of obligations shall not be made known to the related person. (3) A credit service provider or a credit financial institution shall disclose the assigned job and name of its collector whenever the collector makes an activity for claim collection under a loan agreement. [This Article Newly Inserted by Act No. 7523, May 31, 2005] Article 11 (Limitation on Interest Rates, etc. of de facto Credit Service Provider)

The provisions of Articles 8 and 10 shall apply mutatis mutandis to a person who actually engages in credit business without registration of credit business in compliance of the provisions of Article 3. Article 11-2 (Restriction on Brokerage, etc.)

(1) A credit service provider shall not act as a broker for a person who actually engages in credit business without the registration in compliance with the provisions of Article 3.

(2) A credit service provider shall not receive any consideration for brokerage (hereinafter referred to as "brokerage commission") from a party to whom a loan is given.

[This Article Newly Inserted by Act No. 7523, May 31, 2005] Article 12 (Inspection)

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(1) The Mayor/Do Governor may require a credit service provider to make a report on its business and the property related to its business or issue an order to submit information or data or any other necessary order, or assign public official under his/her control to access its business office to make an inspection of its business or property related to its business. (2) The Mayor/Do Governor may request another Mayor/Do Governor who has administrative jurisdiction over one of a credit service provider's business offices to make an inspection (including a joint inspection) of the business office, if the credit service provider has its business offices in two or more different administrative jurisdictions of the Special Metropolitan City, a Metropolitan City, or Do (hereinafter referred to as "City or Do"), if it is considered necessary to protect opposite contractual parties of the credit service provider.

(3) The Mayor/Do Governor may request the Governor of the Financial Supervisory Service under the Act on the Establishment, etc. of Financial Services Commission (hereinafter referred to as the "Financial Supervisory Service") to make an inspection of a credit service provider as prescribed by the Presidential Decree, if it is necessary to make a specialized inspection of the credit service provider. (5) A person, who has access to make an inspection under the provisions of paragraphs (1) through (4), shall carry a certificate showing his/her authority to present it to persons concerned.

(6) The Mayor/Do Governor may issue an order necessary for the supervision of a credit service provider, if necessary, as a result of a review of the report or inspection under the provisions of paragraphs (1) through (4). In this case, the Mayor/Do Governor shall make a notice of the details of the order to another Mayor/Do Governor who has administrative jurisdiction over another business office of the credit service provider, if it has another business office in the City or Do. 9

Dec. 21, 2007>

(7) The Governor of the Financial Supervisory Service may, if it is deemed necessary as results of the inspection under paragraph (4), request the Mayor/Do Governor to make necessary measures on the relevant credit service provider. In this case, the Mayor/Do Governor shall comply with such request unless there is special reason otherwise.

Article 13 (Suspension of Business and Revocation of Registration) (1) The Mayor/Do Governor may issue an order to suspend the whole or part of business of a credit service provider within a prescribed period of time not exceeding one year, if the credit service provider falls under either of the following subparagraphs:

1. If it violates this Act or an order of the Mayor/Do Governor issued under this Act; or

2. If one of its business offices registered with another Mayor/Do Governor becomes subject to the disposition of the suspension of business. (2) The Mayor/Do Governor may revoke the registration of a credit service provider, if the credit service provider falls under any of the following subparagraphs: Provided, That its registration shall be revoked if it falls under subparagraph 1:

1. If the registration under the provisions of Article 3 was made by deceit or any other fraudulent means;

2. If the credit service provider falls under any of subparagraphs 1 through 6 of Article 4;

3. If there is no business performance for six months continuously;

4. If the credit service provider violates the order of the suspension of business issued under the provisions of paragraph (1);

5. If there is no responding notice from the credit service provider, even though thirty days have passed since the Mayor/Do Governor made a public notice to find out the credit service provider's whereabout as prescribed by the Presidential Decree because its whereabout cannot be ascertained.

6. If the credit service provider falls under paragraph (1) 1 and there is high risk of threatening the interest of a opposite party of the credit service provider; or

7. If any of the credit service provider's business offices registered with ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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another Mayor/Do Governor becomes subject to the disposition of the revocation of registration.

(3) The Mayor/Do Governor shall hold a hearing, whenever he/she considers the revocation of registration under the provisions of paragraph (2): Provided, That the foregoing shall not apply to a case under paragraph (2) 5.

(4) The Mayor/Do Governor shall make a notice of the disposition of the suspension of business or the revocation of registration under the provisions of paragraph (1) or (2) to another Mayor/Do Governor who has administrative jurisdiction over another business office of a credit service provider situated in the City or Do, when the Mayor/Do Governor makes such disposition against the credit service provider who has two or more business offices in different administrative jurisdictions of the City or Do. Article 14 (Closing of Transactions Ensuing from the Revocation of Registration, etc.)

A credit service provider, who submits a report on closedown of its business in accordance with the provisions of Article 5 (2) or becomes subject to the disposition of the revocation of registration under Article 13 (2) (including a successor, if the credit service provider is a natural person), shall be deemed to be a credit service provider within the extent that it closes the transactions pending under the loan agreements already executed by it.

Article 15 (Limitation to Overdue Interest Rates) (1) A credit financial institution shall not charge overdue interests for its loan exceeding the guideline set up by the Presidential Decree, considering the expenses for raising the fund for the loan, the expenses for the management of overdue loan, the amount of overdue loan, overdue period, etc.

(2) The Financial Services Commission may order a credit financial institution to correct its practice of charging overdue interests in violation of the provisions of paragraph (1). (3) The provisions of Article 8 (3) shall apply mutatis mutandis to the overdue interest charged exceeding the guidelines under the provisions of paragraph (1).

Article 16 (Survey on Actual Status of Credit Service Providers) (1) The Mayor/Do Governor shall survey frequently on the current status ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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of credit service providers and submit the results therefrom to the Minister of Pubic Administration and Security and the Financial Services Commission each year.

(2) The the Minister of Pubic Administration and Security and the Financial Services Commission may request the Mayor/Do Governor, or a head of an administrative organ or a public organization to provide information or materials necessary for the comprehension of the current status of credit service providers and the researches on the related systems. Article 17 (Registration Fee)

(1) A person, who wants to file for the registration under the provisions of Article 3, shall pay the fee as prescribed by the Presidential Decree. (2) A credit service provider, who is subjected to the inspection under the provisions of Article 12 (1) through (4), shall pay the inspection fee as prescribed by the Presidential Decree to the Mayor/Do Governor or the Governor of the Financial Supervisory Service.

Article 18 (Settlement of Disputes)

(1) The Mayor/Do Governor, who has administrative jurisdiction over a credit service provider's business office, shall have the committee for conciliation of disputes for the settlement of the disputes arising between the credit service provider and its opposite contractual parties. (2) The composition and management of the committee for conciliation of disputes under the provisions of paragraph (1), the procedure and methods for the conciliation of disputes, and other necessary matters concerning the conciliation of disputes shall be prescribed by the Presidential Decree. Article 19 (Penal Provisions)

(1) A person, who falls under any of the followings subparagraphs, shall be punished by imprisonment with labor for no more than five years or a fine not exceeding fifty million Won:

1. A person who engages in the credit business without the registration in violation of the provisions of Article 3;

2. A person who attains the registration under the provisions of Article 3 by deceit or any other fraudulent means;

3. A person who makes an advertisement for credit business in violation ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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of the provisions of Article 9-2; or

4. A person who commits an act of claim collection in violation of the provisions of Article 10 (1) 1 (including the violation to which the aforementioned provisions are applicable mutatis mutandis under the provisions of Article 11).

(2) A person, who falls under any of the following subparagraphs, shall be punished by imprisonment with labor for no more than three years or a fine not exceeding thirty million Won:

1. A person who allows another person to engage in a credit business in his/her name, or lends his/her registration certificate to another person in violation of Article 5 (2);

2. A person who receives interests in violation of the limitation to interest rates under the provisions of Article 8 (1) (including the violation to which the aforementioned provisions are applicable mutatis mutandis under the provisions of Article 11);

3. A person who commits an act of claim collection in violation of the provisions of Article 10 (1) 2 or 4 (including the violation to which the aforementioned provisions are applicable mutatis mutandis under the provisions of Article 11);

4. A person who acts as a broker or receives brokerage commission in violation of the provisions of Article 11-2 (1) or (2); or

5. A person who fails to comply with the order for correction under the provisions of Article 15 (2).

(3) The punishments by the imprisonment and the fine under paragraphs (1) and (2) may be imposed concurrently.

Article 20 (Joint Penal Provisions)

If the representative of a legal entity, or an agent, an employee, or any other employed person of the legal entity or an individual commits such an act as prescribed in Article 19 in connection with the business affairs of the said legal entity or individual, not only shall such an offender be punished accordingly, but also the legal entity or individual shall be punished by a fine under the same Article.

Article 21 (Fine for Negligence)

(1) A person, who falls under any of the following subparagraphs, shall ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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be punished by a fine for negligence not exceeding twenty million Won:

1. A person who fails to file for the registration of change or submit the report on the closedown of its business in violation of the provisions of Article 5;

2. A person who fails to deliver an agreement in violation of the provisions of Article 6 (1) or who has delivered an agreement with some or all terms and conditions omitted among those prescribed in subparagraph 1 through 11 of the same paragraph of the said Article;

3. A person who fails to post the notice or make the explanation in violation of the provisions of Article 9 (1);

4. A person who makes an advertisement in violation of the provisions of the provisions of Article 9 (2);

5. A person who inquires a debtor's related person about his/her whereabout, etc. or informs a debtor's related person of the facts of his/her obligations in violation of the provisions of Article 10 (2); or

6. A person who fails to respond properly to, or interferes with, the inspection under the provisions of Article 12 (1) through (4). (2) A person, who falls under any of the following subparagraphs, shall be punished by a fine for negligence not exceeding five million Won:

1. A person who fails to preserve the agreements and the documents related to the agreements in violation of the provisions of Article 6 (2);

2. A person who commits an act of claim collection in violation of the provisions of Article 10 (1) 3; or

3. a person who fails to disclose his/her assigned job and name in violation of the provisions of Article 10 (3).

(3) The fine for negligence under the provisions of paragraph (1) or (2) shall be imposed and collected by the Mayor/Do Governor as prescribed by the Presidential Decree. (4) A person, who is dissatisfied with a disposition of fine for negligence under paragraph (3), may raise an objection to the Mayor/Do Governor within thirty days after he/she is notified of the disposition.

(5) If a person, who is subject to a disposition of fine for negligence under paragraph (3), raises an objection under paragraph (4), the Mayor/Do ACT ON REGISTRATION OF CREDIT BUSINESS AND PROTECTION OF FINANCE USERS

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Governor shall, without delay, notify the competent court of the objection, and the court shall, in turn, proceed to a trial on the fine for negligence pursuant to the Non-Contentious Case Litigation Procedure Act.

(6) If no objection is raised and no fine for negligence is paid within the period as prescribed in paragraph (4), the Mayor/Do Governor shall collect the fine for negligence by referring to the practices for the dispositions on default of local taxes. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force two months after the date of its promulgation. Article 2 (Effective Period, etc.)

(1) The provisions of Articles 8 (including the case to which the said Article shall be applicable mutatis mutandis under the provisions of Article 11) and 12 shall be effective until December 31, 2008.

(2) The provisions of Articles 19 (2) 2 and 21 (1) 6 shall apply to a person who receives interests in violation of the provisions of Article 8 (1), fails to respond properly to, or interferes with, the inspection under the provisions of Article 12 (1) through (4) during the effective period under the provisions of paragraph (1), even after the expiry of the effective period under the provisions of paragraph (1). Article 3 (Applicability)

This Act shall become applicable to the loan agreements executed after this Act enters into force.

Article 4 (Transitional Measures concerning Registration of Credit Business)

(1) A person, who engages in credit business at the time when this Act enters into force, shall file for the registration of his/her credit business with the Mayor/Do Governor within three months after this Act enters into force.

(2) The provisions of Article 19 (1) 1 shall not apply to a person who engages in credit business at the time when this Act enters into force before and until the end of the effective period under the provisions of paragraph (1).

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(3) The provisions of Article 4 shall not apply to a person who engages in credit business with a business registration at the time when this Act enters into force.

ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation. Articles 2 through 6 Omitted.

ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.

(2) (Applicability of Interest Rates) The amended provisions of Article 8 (1) shall apply to the loan agreements executed after this Act enters into force.

(3) (Transitional Measures concerning Effective Period of Registration of Credit Business) With respect to credit service providers already registered at the time when this Act enters into force, the effective period of the registration shall be counted from the enforcement date of this Act, in applying the amended provisions of Article 3 (5).

ADDENDA

(1) (Enforcement Date) This Act shall enter into force three months after the date of its promulgation.

(2) (Applicability on Restriction of Interest Rates) After the enforcement date of this Act, the amended provisions of Article 8 (1) shall apply even to the loan agreements executed before this Act enters into force. ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force one year after the date of its promulgation. (Proviso Omitted)

Articles 2 through 7 Omitted.

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ADDENDA

Article 1 (Enforcement Date)

This Act shall enter into force on the date of its promulgation. Articles 2 through 5 Omitted.