Government’s Support of Regaining Credit

 

Regarding regaining credit, since 2008, government has helped 5.39 hundred thousand people to recover their credit. For those who has repaid the loan sincerely, has got the funds for living with low interest (4%). There have been certain achievements but there should be more help with finance and other efforts to prevent deterioration of credit rating.

To prevent this, finance authority would help them in 2 ways.

  (Regaining credit)

l  Expand the funds for those who have been sincerely repaid the loan with low-interest and reduce the cost related to regaining credit. If debtor repays the loan sincerely for more than 1 year, Credit Counseling & Recovery Service would support finance with low interest(4%).

*(2010) 70 billion → (2011) 90 billion → (2012) 100 billion

 

l  If debtor cannot get the support with low interest, finance authority would reinforce the cooperation to make debtors get the Sunshine Loan.

l  Expand the scope of applicants who could apply credit repair and readjustment for their credit at no cost. (cost of readjustment for emergency would be exempt for once and cost of apply for vulnerable class such as army would be free)

 

(Support of getting job for debtors)

l  It would be banned for using someone’s credit information as criteria in employing.

l  If someone’s loan is overdue, grace period (2 years) is given to debtors after graduation.

l  For university students, support for credit repair is allowed and delay the repayment period up to 2 years simultaneously with start of credit repairing.

As mentioned above, financial authority is trying to help university students by alleviating the burden of debt. Status quo, if student’s loan is more than 6 months overdue, that overdue information is recorded in Bankers Association.But there are 2 problems.

1. If the students apply for the loan and cannot repay the debt for his/her family reasons, there is a difficulty to get a job.
2. If there is a difficulty to get a job due to the overdue record, It makes much more hard to repay the loan

Financial authority suggests some ways to deal with these problems.

1. Promote the way that delay specific period of registration in Banker Association even if it’s the normal school expenses which are provided by Korea Student Aid Foundation(KOSAF).
2. Concrete period, procedures are going to be discussed with Bankers Association and KOSAF.

 

  City of Seoul has already notified that they will support 4.1 billion-won up to 30 thousand people who got the loan from KOSAF. According to Seoul city, the purpose of doing this support is that those students who should pay for the interest might have the potential to be the delinquent borrower in the future. The applicants could be university students whose household income is less than 52 million-won. But, if there are more than 3 children, regardless of household income, Seoul city offers the 50% of interests. There would be no Separate application procedures including check for requirements. Only if the student who graduated from high school which has no advance information is in college outside the Seoul, there would be separate procedure. Also, they support not only students whose address is in Seoul but also students who are going to university in Seoul but their address is not in Seoul.  Related inquiry could be reached at 02-2171-2995~6.

 

Ju Hyun Han (blackhall4@naver.com)

Warning of abusing Credit Cards

Warning of abusing Credit Cards

Status quo, the numbers of cards that are distributed in market increased 11.5% compared to last year. This phenomenon was caused due to cutthroat competition among card companies. They are trying to expand their size of company and during that process, companies do not consider consumers’ credit rating which is threatening consumers’ credit.

But, now it’s hard for card companies to issue credit cards easily to consumers. In past, because of the loose credit standards, there were actually few limits regarding issuing credit cards to people who were considered as having low repayment capability. However, the department of Financial Supervisory Service made new and strict guidelines.

 

The departments of Financial Services Commission and Financial Supervisory Service have designated 4 parts that are going to be supervised. Each of them is <Assets of loan>, < limits of using credit card>, <numbers of credit card> and <cost of marketing>. Specific policies include limits of using credit cards per year to 5% and limits of increasing numbers of credit cards to 3%.

Increasing rate of loan portfolio is controlled between 2% and 3%. The main reason of this regulation is number of credit cards. As said above, increasing rate of numbers of credit card was 11.5%, as a result, total numbers of credit card are 120 million which is 5 times more than economically active populations. But regarding this regulation, there are some controversies.

First, many regulations are absolutely advantageous to ‘leading companies’. When it comes to issuing new card to 3%, leading card companies do not care that much. But it could cause critical damage to other companies who have strived to increase the numbers of credit card. For instance, Shinhan Card can issue new 900 thousand credit cards because they already have issued 30 million cards. But compared to that, other companies who have issued 5 million cards, they can only issue 150 thousands credit cards.

Second, there is a rumor that regulation of increasing rate of loan portfolio was made to boost saving banks. By, restricting cards and cash advance could attract ordinary people to saving banks. Another claim that default rate of card companies are very low so it would rarely cause crisis also accelerates the conspiracy.

Regarding this issue, Card companies have shown strong opposition. “It could be regarded as direct interference to company”, “It means do not make profit”. Also, an official of one card company said “It makes other following companies hard to enter into market.”

But, to deal with excessive point policy, interest-free installment and other policies, strong regulations have been viewed as necessary solutions. As the captains of Financial Services Commission and Financial Supervisory asked for ‘strong and direct regulation’, these would be long-term measures.

In fact, officials of Financial Services Commission have already found 20 thousand improper cases and those cases were focused on big 6 companies including Shinhan, Hyundai, KB, Samsung, Lotte and Hana SK.

Financial Services Commission has been received the management plans from all card companies and those companies who have violated the rules more than 2 months, would be especially supervised.

한 주 현/ Han Ju Hyun/ blackhall4@naver.com