![Customers flock to the office of WeMakePrice in Gangnam District, southern Seoul, Thursday, to demand refunds on their payments, as the company and its parent, Qoo10, face potential insolvency. Yonhap](https://newsimg.koreatimes.co.kr/2024/07/25/f31c7223-2e86-420e-ab84-08a2a777d30b.jpg)
Customers flock to the office of WeMakePrice in Gangnam District, southern Seoul, Thursday, to demand refunds on their payments, as the company and its parent, Qoo10, face potential insolvency. Yonhap
A growing number of local commercial lenders are denying accounts receivable loans to small merchants on WeMakePrice and TMON, the two beleaguered e-commerce firms operated by Qoo10 at the center of a settlement failure fiasco over the past few weeks, market watchers said Thursday.
Many say the risks of a chain of defaults across the greater financial market will continue to heighten, as part of the spillover of Qoo10's overextended global expansion drive amid questionable financial profiles of its subsidiaries.
The three-party loan involves the bank, the seller and the e-commerce platform. The sellers are able to take out loans in advance for the amount of sales total made on the e-commerce platform as invoiced by the sellers' accounts receivables. The banks are then able to redeem the loan after the e-commerce firm pays the amount on the following settlement date.
Short-term borrowing is used frequently by almost all cash-strapped sellers to continue business operations. This is because settlement between the bank and e-commerce firm could take months on end depending on the terms and agreements outlined by the latter.
Loans denied
KB Kookmin Bank and Standard Chartered (SC) Bank Korea halted accounts receivable loans to an unidentified number of the two e-commerce firms' partner sellers, Tuesday.
The measure was to limit losses of bank customer assets, according to SC Bank Korea.
"We decided to suspend lending to some borrowers exposed to greater risk of settlement failures until after the issue is resolved," an SC Bank Korea official said.
"We do not know when the service will resume. The decision will remain in place to prevent losses for our customers from distressed loans and delinquencies. We will inform the affected borrowers as soon as the temporary measure is lifted."
Financial Supervisory Service data showed the outstanding balance of the loans from 2019 to 2022 came to 1.3 trillion won ($930 million).
The figure stood at 623.9 billion won in 2022, a 25-fold surge from 25.2 billion won in 2019.
Coupang, a leading e-commerce company in the country, topped the list of the borrowers' partner firms, followed by WeMakePrice.
The two had a maximum of two months of settlement, among the longest periods in the e-commerce market.
Meanwhile, a group of 200 furious customers stormed the building of the two e-commerce firms, Thursday, demanding a full refund of their previous payments.
Among them were payers of over 10 million won for a family vacation reserved with WeMakePrice-mediated travel agencies.
Ryu Hwa-hyeon, senior business developer and CEO of WeMakePrice, said the refund requests will be processed in full.
"We will do our utmost to limit consumer inconveniences and business losses for small and medium-sized enterprises as well as the self-employed."
FSS
FSS Governor Lee Bok-hyun apologized over the debacle during a debriefing at the National Assembly National Policy Committee in Yeouido.
"We apologize to the public. A team of six investigators was dispatched for an on-site inspection," Lee said.
FSS First Senior Deputy Governor Lee Se-hoon said the two e-commerce firms have registered a combined 170 billion won in failed settlements thus far.
"A team of FSS and Fair Trade Commission (FTC) officials led an investigation to identify potential violations of the Electronic Commerce Law," the first senior deputy governor said during a press briefing at the FSS headquarters in Seoul.
"We plan to fortify cooperation to limit the scope of harm to consumers and intermediaries, including card and payment firms as well as the tourism industry."
The FTC established a consumer complaint response team early Thursday at the Korea Consumer Agency. The team will aid consumers seeking remedy in civil court.