Hyundai Capital Services, Inc. was found to have issued irregular loans worth 800 billion won ($720 million) to two Hyundai Motor Group subsidiaries, the Financial Supervisory Service said Sunday.

According to the financial regulator, Hyundai Capital has breached the state supervisory rules that oblige a lender to immediately notify the FSS governor of a credit-based lending worth 1 billion won or more.

“While Hyundai Capital signed the loan contract with its two sister firms (in the automotive group) between October 2011 and November 2012, it informed the FSS chief of the deal in February 2013 (as a belated report after the regulatory inspectors’ probe),” an official said.

In addition, inspectors revealed that Hyundai Motor Group’s financial unit engaged in blackmailing delinquent borrowers and other improper lending practices.

The FSS levied fines of 100 million won on Hyundai Capital while issuing a warning against the company and two of its senior executives. The company’s three involved employees were also subject to sanctions including salary reduction.

Hyundai Motor Group subsidiary Hyundai Card was also reprimanded by the supervisor for unauthorized sales activities.

In a separate development, officials said Hyundai Department Store violated the obligatory rules for notification when it was making customer-benefit contracts with Hyundai Oilbank in July 2013 and Happy Point in March 2013.

Hanwha Galleria was also found to have been implicated in a similar breach in its operation of the department card business.

The FSS also took punitive measures on four other credit card firms ― Shinhan, KB Kookmin, Lotte and Hana SK ― for irregularities during their sales activities.

By Kim Yon-se (kys@heraldcorp.com)