Purchase of Delinquent Claims Held by Regional Credit Guarantee Foundations, Mutual Finance Institutions, and Lending Companies
The New Start Fund, a bad bank that writes off individual debts of up to 50 million won that have been in arrears for more than seven years, has purchased 44.09 billion won worth of long-term delinquent claims.
On February 26, the Financial Services Commission announced that the New Start Fund had bought unsecured individual claims of up to 50 million won that have been delinquent for more than seven years, held by regional credit guarantee foundations, mutual finance institutions, and lending companies.
As a result of this purchase, a total of 47,000 people will be freed from collection activities.
Among the purchased claims, the debts of socially vulnerable groups, such as basic livelihood security recipients, will be written off without a separate repayment capacity review. For the remaining claims, repayment capacity will be assessed; if a debtor is found to have lost repayment capacity to a level equivalent to personal bankruptcy, the debt will be written off within one year, and if repayment capacity is found to be significantly insufficient, a debt adjustment process will be pursued.
Since last week, creditor financial companies have been notifying debtors of the planned transfer of their claims. Debtors can check whether their debts have been purchased, the results of the repayment capacity review, and whether their claims will be written off through the New Start Fund website.
To date, the New Start Fund has acquired about 8.2 trillion won worth of claims over a total of four rounds, with approximately 640,000 beneficiaries, including duplicates.
Starting with this fourth round of purchases, the New Start Fund plans to sequentially buy long-term delinquent claims held by mutual finance institutions within the first half of the year. In particular, as Saemaul Geumgo has as many as 1,085 cooperatives holding eligible claims, the fund will proceed with phased purchases in three stages from February to April. In March, it plans to acquire the second batch of long-term delinquent claims from Saemaul Geumgo, as well as claims held by the National Federation of Fisheries Cooperatives and lending companies.
Participation of the lending industry in the New Start Fund is also expanding. Among the top 30 lending companies holding long-term delinquent claims, the number that have joined the New Start Fund agreement has increased by three from the end of last year, reaching 13.
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