Banks Offer Debt Reduction for Community Service

“Community service will offset debts.”

Banks are offering debt reductions for credit delinquents in proportion to the hours they spend on community service or training programs.

Banks said yesterday that they will widen the debt reduction program further. A debtor with an outstanding balance of five million won (5,260 U.S. dollars) or less can earn a credit worth 30,000 won an hour up to 240,000 won a day by doing community service.

Woori Bank was the first to run the program in 2005, but it failed to produce much due to numerous conditions attached. For example, a Woori customer who had an outstanding balance with other banks was ineligible for the program, but that restriction has been lifted.

People can also reduce the debts of relatives or friends by performing community service.

A blood donor can deduct 300,000 won of debt for one donation, but this is allowed a maximum of twice a year.

Furthermore, banks will give a debt reduction of 150 percent to those who serve the community on holidays or those with disabilities or from low-income families.

Shinhan Bank has run a similar program since August 2006. A credit delinquent can repay 30,000 won per hour up to 240,000 won per day, as long as he or she has an outstanding balance of five million won or less. If a debtor has only overdue interest remaining, four hours of community service repays the entire sum.

A senior Shinhan officer said, however, “Only 50 people have benefited. Not so many people know about it.”

Korea Exchange Bank and Industrial Bank of Korea now have similar programs.

chance@donga.com