In the future, if the debtor, spouse, or parent is hospitalized, debt collection will be able to be postponed for up to six months. It was decided to guarantee the debtor’s normal life, including placing a limit on the number of contacts for collection purposes. Debtors who are in arrears of less than 30 million won will have the right to directly request principal forgiveness from banks.
An advertisement related to credit card loans posted on the streets of Seoul on March 7th. News 1
On the 16th, the Financial Services Commission announced that the Personal Debtor Protection Act will take effect from the 17th. It has been pointed out that the current delinquent debt management system is centered around the public sector, including the Credit Recovery Committee and the courts, and that debt adjustment is carried out only after insolvency occurs. The gist of the bill, which takes effect on the 17th, is to allow financial companies to adjust their debts on their own before insolvency occurs through consultation with debtors.
Debt adjustment can be requested from financial institutions
A new right to request debt adjustment will be established so that delinquent borrowers with a loan amount of less than 30 million won can directly request debt adjustment from financial companies. Financial companies must also inform debtors that a request for debt restructuring is possible. Financial companies such as banks must establish internal standards for debt restructuring for consistent review and notify whether or not debt will be adjusted within 10 business days upon receiving a request.
In case of overdue loan amount of less than 50 million won, the method of charging interest due to overdue payment will be improved. Currently, even if only part of the debt is overdue, additional interest is charged to the entire principal amount due to overdue payment, but additional interest is charged only on the balance that is due for repayment. For example, if you decide to repay 24 million won over 12 months, but you are 1 million won overdue on the first repayment date, you will only pay interest on the 1 million won.
Limit the frequency of debt reminders
The number of debt collections is limited to a maximum of 7 times in 7 days. Additionally, debtors can request that collection contact not be made during specific times or through specific phone numbers. For example, this means that you can decide that visits to your home to collect debt are not possible. In the future, if an immediate family member of the debtor or his or her spouse undergoes surgery, is hospitalized, gets married, or dies, collection contact can be postponed for up to 6 months.
There are also concerns that if borrowers who have failed to repay their loans blindly apply for debt restructuring, financial companies will become overworked. On the other hand, there is an analysis that the effectiveness of financial companies’ own debt restructuring will not be significant. Oh Tae-rok, a researcher at the Korea Institute of Finance, said in a recent report titled ‘Tasks to Improve the Effectiveness of Financial Institutions’ Own Debt Restructuring’, “Individual creditor institutions’ own debt restructuring method is likely to be not much different from the current debt restructuring system of the Financial Services Commission. “If this happens, it is difficult to expect substantial improvement from the individual debtor’s perspective,” he pointed out.
Reporter Jeong Jin-ho jeong.jinho@joongang.co.kr
