Enforcement Decree and Supervisory Regulations of the Personal Debtor Protection Act Proposed
Limiting Excessive Interest Burden Due to Delinquency
Institutionalizing Financial Companies' Own Debt Adjustment System
Regulations on bond sales will be strengthened going forward, reducing the likelihood of exposure to illegal debt collection. A total debt collection limit system, which restricts the number of collection attempts to 7 times within 7 days, and a collection deferral system, which allows for a temporary suspension of collection in cases of disasters or accidents, will also be implemented.
The Financial Services Commission will conduct a legislative notice on the draft enforcement decree and supervisory regulations of the "Act on the Management of Personal Financial Bonds and the Protection of Personal Financial Debtors," which focuses on strengthening the management of personal financial bonds after delinquency and enhancing debtor protection regulations.
First, the regulations related to bond sales have been strengthened to enhance debtor protection. Financial companies will be discouraged from routinely conducting sales when performing bond transfer operations and will be encouraged to consider debtor protection. Specifically, bonds with unclear bond-debt relationships, such as those involving identity theft, will be prohibited from being transferred. Transfers of bonds that have been transferred three or more times, in addition to those under debt adjustment, will also be restricted.
Measures to protect debtors from excessive collection by financial companies have also been established. Collection will be prohibited if there is a concern that allowing collection would harm debtor protection or sound credit order. Collection of bonds is also prohibited if debt adjustment (including financial companies’ own adjustments, Credit Counseling & Recovery Service debt adjustments, and court rehabilitation) has been received. The number of collection attempts is limited to 7 times within 7 days, but attempts that do not reach the debtor when contacting by visit or phone are excluded from the count. If repayment is difficult due to disasters or surgeries, hospitalizations, marriages, or funerals of the debtor or their spouse or immediate family, collection can be deferred for up to 3 months by agreement between the debtor and the creditor.
Additionally, measures to activate financial companies’ own debt adjustments (such as notification methods after debt adjustment requests and conditions for agreement cancellation) and to limit excessive interest burdens arising from delinquency are also included.
The financial authorities stated that with the enforcement of the law, debtor rights will be protected and the possibility of recovery will increase, while the recovery value from the perspective of bond financial companies can also be enhanced. If debt adjustment between individuals and financial companies is activated, public debt adjustment institutions (Credit Counseling & Recovery Service and courts) can focus on debt adjustment for multiple and long-term delinquents, and financial companies will take primary responsibility for debt adjustment of their transaction debtors, which is expected to socially activate debt adjustment.
The Financial Services Commission plans to actively collect opinions from related ministries, experts, and the industry through the legislative notice. Before the law is enforced, it will operate a “Financial Sector Rapid Response System for Difficulties” and prepare for smooth implementation of the law by distributing separate internal standard best practices, comprehensive Q&A collections, and holding explanatory sessions.
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