The Financial Services Commission has announced that it will extend the operation of the "Personal Delinquent Loan Purchase Fund," which was established to prevent excessive collection of personal delinquent loans resulting from the impact of COVID-19, until the end of next year.
On December 31, the Financial Services Commission explained the reason for the extension, stating, "Even after the end of COVID-19, high interest rates and high inflation persist, leading to a delay in economic recovery and an increase in the number of vulnerable individuals. If the purchase fund operation ends, there is a risk that financial institutions will conduct a concentrated sale of the relevant loans, increasing the collection burden." Accordingly, the application period for the purchase fund has been extended by one year, from the end of this year to the end of next year.
The purchase fund has been operated since June 2020 to prevent excessive collection of personal delinquent loans that have occurred since February 2020 due to the effects of COVID-19, and to support the rehabilitation of individual debtors. As of the end of last month, the fund had purchased approximately 179,000 cases of personal delinquent loans worth about 1.1264 trillion won, alleviating the collection burden on delinquent debtors and supporting their recovery.
The Financial Services Commission also decided to refrain from selling the loans under the Credit Recovery Committee's (Shinbokwi) expedited debt adjustment program. There have been concerns that when such loans are sold, the type of creditor changes, resulting in a drop in credit scores and unexpected credit disadvantages for debtors.
An official from the Financial Services Commission emphasized, "We will continue to review necessary policy measures together with the financial sector to reduce the delinquency burden on vulnerable individual debtors and support their return to normal economic activity."
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