Potential Credit Defaulters to Be Four Million

Results show that there are over four million “potential credit defaulters,” meaning those who can fall to credit delinquency at any time.

The official figure for the end of last year was 3.72 million in credit defaulters. When adding the number of potential defaulters, it totaled some 7.72 million, becoming a critical setback to recovering the economy.

GreyMDS (Market Data Solutions), a consulting firm for credit card companies, announced yesterday that the number of potential credit defaulters, which the domestic credit card companies manage in priority by their standards, was totaled to be estimated at some 4 million.

GreyMDS Chairman Lee Ho-geun said, “Most of these potential defaulters have already borrowed money up to their limits from the banks, and many are borrowing from loan companies at high interest rates and barely avoiding the credit defaulter registration.”

Approximately 50 to 130 thousand people are being newly registered as credit defaulters among potential credit delinquents. Following this rate, it is forecasted that the number of credit defaulters registered will exceed 4 million during the second quarter (April-June) of this year.

However, the joint collection program or plans to relieve the credit defaulters that each finance company and the Credit Counseling and Recovery Service put out have not yet showed productive results.

Moral hazards such as “instead of taking the trouble to pay off the debt, I would rather be registered as a credit defaulter and readjust my financial obligations” are showing.

Choi Suk-hee, senior researcher at the Samsung Economic Research Institute, pointed out that “a system which inspects and warns an individual of credit standing before he or she becomes a potential credit defaulter, the level right before becoming a credit defaulter, is necessary.”

Meanwhile, at a luncheon meeting with the heads of financial institutions held at the Korea Federation of Banks building in Seoul Myung-dong yesterday, Lee Hun-jai, Deputy Prime Minister and Minister of the Ministry of Finance and Economy requested, “In order to stop the sharply increasing number of credit defaulters, the presidents of the banks should personally take charge and postpone the collecting of the loans which had been competitively lent.”

Lee added “Each bank should show concern to the ‘limited’ credit defaulters who are almost credit defaulters.”