Government Helps Credit Delinquents Repay their Debts if They Struggle to Sustain Themselves Economically

Starting from March, 150,000 people who are subject to the National Basic Livelihood Security Act among credit delinquents will be able to have their overdue interests written off, on the condition of performing community service.

College graduates who became credit delinquents because they failed to repay their college loans will get a longer grace period for repayment until they land a job.

Lee Hun-jae, vice prime minister and minister of Finance and Economy, announced in a regular briefing on January 14 at the Gwachon Government Complex that the government was basically not considering writing-off the principal for those who became credit delinquents facing economic hardships including those subject to the National Basic Livelihood Security Act, and that it would draw up measures within February which would take effect in March.

Vice Prime Minister Lee explained, “We are planning to give an opportunity for those subject to the National Basic Livelihood Security Act to repay their debts through job training and community service.”

He said that approximately 150,000 people are reported as credit delinquents subject to the security act.

An official at the Ministry of Finance and Economy explained, “Finance companies will write off part of the overdue interests. In return, we will have those delinquents engage in community service such as garbage collecting or washing the disabled, or receive a mandatory job training, to prevent moral hazard.”

The vice prime minister also added, “Finance companies should assume some responsibility because they lent money to those who rest their livelihood on the government under the National Basic Livelihood Security Act,” adding, “It can be a way to extend the repayment period and exempt interests during the period, so that they can repay the money when their financial status improves.”

Meanwhile, he commented on the sale of Korea First Bank, “The government failed to receive expected positive effects in terms of policy, such as the introduction of advanced finance techniques”, adding, “We should learn a lesson from this case.”

Chi-Young Shin higgledy@donga.com