[DigitalToday reporter Ji-young Lee] South Korea’s Financial Supervisory Service will begin an inspection into high-interest loans offered by Coupang affiliate Coupang Financial.

On Jan. 8, the FSS said it sent Coupang Financial an advance notice a day earlier that it would start the inspection next week. The move marks a shift to a formal inspection about a month after it began an on-site check in early December.

Coupang Financial’s “Seller Growth Loan” lends up to 50 million won in business funds to Coupang merchants based on their sales performance, at interest rates of up to 18.9 percent a year. The FSS is reported to have identified signs of potential violations of the Financial Consumer Protection Act during the on-site check.

The product has also drawn criticism for applying excessively high interest rates to merchants based on the dominant position of a large retail platform.

The FSS is reported to be examining whether Coupang Financial, while selling secured loans that tie merchants’ settlement receivables to loan repayment funds, set interest rates in a way similar to unsecured credit loans that assess only creditworthiness.

Separately, an on-site check of Coupang Pay is under way in connection with a personal data leak at Coupang, and the FSS plans to immediately convert it into an inspection if it finds signs of wrongdoing.