South Korean Regulator Targets Myeongryun Jinsa Galbi Over Alleged Predatory Franchise Lending
The Korea Fair Trade Commission (KFTC) has launched a regulatory crackdown on Myeongryun Jinsa Galbi following allegations that the company engaged in an “interest business” by leveraging government policy funds to provide high-interest loans to its franchisees.
According to reports, the company and its affiliate, Myeongryun-dang, allegedly secured national policy loans at a preferential rate of 3%. These funds were then lent to franchisees at significantly higher rates, reaching as high as 17%. This interest rate arbitrage is estimated to have generated approximately 230 billion won in profits for the company.
The KFTC’s decision to initiate sanctions underscores a growing regulatory focus on the fair treatment of franchisees and the prevention of the misuse of public funds intended to support small business stability. The case highlights a significant disparity in borrowing costs that shifted the financial burden onto individual store owners.
In a direct response to the controversy surrounding Myeongryun Jinsa Galbi, the government has announced new countermeasures to prevent similar occurrences. Under the new guidelines, the government will restrict access to policy funds for companies found to be providing high-interest loans to their franchisees.
This regulatory shift signals a tighter oversight mechanism for how corporate entities utilize state-backed financial support, ensuring that the benefits of low-interest policy loans reach the intended small-scale operators rather than being absorbed as corporate profit through predatory lending practices.
