Simultaneous Adjustment of Communication and Financial Debts... Government Supports Recovery for Vulnerable Groups

Addition of Telecom Debt to Credit Recovery Committee Mediation
Debt Collection Suspended the Day After Debt Adjustment Application
Up to 90% Principal Reduction for Vulnerable Groups
10-Year Long-Term Repayment Also Possible
Employment and Welfare Linked to Encourage Faithful Repayment
"Up to 370,000 Debtors to Benefit"

From now on, communication debts will be added to the debt adjustment targets managed by the Credit Recovery Committee, allowing them to be adjusted together with financial debts. Vulnerable groups can receive up to a 90% reduction on the principal of communication debts. If debts are paid faithfully for a certain period, communication services can be used. Comprehensive support such as credit management services for practical recovery and employment and welfare linkage will also be provided.

The Financial Services Commission, Ministry of Science and ICT, Credit Recovery Committee, and telecommunications industry announced on the 20th that they have prepared the "Financial and Communication Vulnerable Groups Recovery Support Plan" after five months of consultation. The plan also includes measures to facilitate smooth social reintegration for those who have difficulty in normal economic activities and daily life.

First, from the 21st, through the integrated debt adjustment of financial and communication debts by the Credit Recovery Committee, up to 90% of the debt principal can be reduced. The first debt adjustment support is scheduled to be implemented in August and September. Currently, the Credit Recovery Committee can only adjust financial debts, and communication debts such as communication fees and mobile phone payment charges could not be adjusted. Even if the adjustment was received, debtors had to apply separately to the telecommunications company to receive installment support for five months.

With the implementation of "integrated debt adjustment," which adjusts communication debts together with financial debts, collection efforts will be immediately suspended the day after the debt adjustment application. Debtors can receive adjustment for both financial and communication debts at once through the Credit Recovery Committee without needing to apply separately to telecommunications companies. Considering the debtor's repayment ability through income and asset assessments, up to 90% of the principal will be reduced, and long-term installment repayment (10 years) will be allowed. Vulnerable groups such as basic livelihood security recipients will receive up to 90% reduction, while for other general debtors, debts to the three major telecommunications companies will be uniformly reduced by 30%, and debts to budget phone operators and mobile payment companies will be reduced by 0-70% depending on repayment capacity. If debts under the integrated debt adjustment are faithfully repaid for more than three months, communication services will be resumed even if all overdue communication debts are not fully paid.

Employment and welfare linkage for communication debt adjusters will encourage faithful repayment and support practical economic recovery. The Credit Recovery Committee will provide comprehensive support including employment and welfare linkage and credit management. Specifically, support will be provided to help debtors return to the labor market. Through the employment-dedicated window at the Integrated Financial Support Center for the Underprivileged, employment support programs such as the National Employment Support System and the Tomorrow Learning Card can be utilized. If job-seeking efforts are confirmed, employment promotion subsidies (up to 500,000 KRW) will be provided, and incentives such as additional reduction (15% of principal) will be given upon lump-sum repayment after employment. Credit counseling and management, including financial management methods, will be conducted to help return to normal financial life. If credit scores improve through faithful repayment, encouragement funds (500,000 KRW) for credit improvement will also be given. Welfare support programs such as livelihood, housing, and medical support through the Social Security Information System will also be provided.

Measures to prevent moral hazard have also been established through a three-step review process of investigation, deliberation, and creditor consent to ensure that support is not provided to intentional defaulters or high-asset individuals. The National Tax Service will be linked to objectively investigate the debtor's assets, income, and repayment ability. The appropriateness of the debt adjustment plan will be reviewed by a deliberation committee including experts within the Credit Recovery Committee, and the final decision on debt adjustment will be made with creditor consent.

The authorities expect that up to 370,000 communication debtors (with a total debt amount of 50 billion KRW) will benefit from this measure. It is anticipated that vulnerable groups previously in the blind spot of debt adjustment will be able to return to daily life and achieve economic recovery, and a virtuous cycle structure will be formed where social costs such as welfare resource expenditures continuously decrease.

Meanwhile, on the same day, Kim Joo-hyun, Chairman of the Financial Services Commission, and Lee Jong-ho, Minister of Science and ICT, visited the Integrated Financial Support Center for the Underprivileged located in Jung-gu, Seoul, to observe the site where communication debt adjustment consultations are conducted. They talked with center counselors about the demand for communication debt adjustment so far, difficulties faced by visitors to the Credit Recovery Committee, and the expected effects of implementing communication debt adjustment. Chairman Kim said, "Through this plan, the government will actively support debtors to stand up on their own and recover economically." Minister Lee emphasized, "Considering that communication services are essential goods in the era of digital deepening, this plan was prepared to support the recovery of vulnerable groups who inevitably incurred communication debts."