“Let’s Hold Out a Little Bit Longer”

As the news that the government will be announcing additional measures to relieve credit delinquency, the number of credit defaulters applying for debt restructuring to the Credit Counseling & Recovery Service (CCRS) has sharply fallen.

This is due to the anticipation that if they hold out a bit longer, the burden for the debts may be greatly relieved.

The financial industry is apprehensive that debtors may show a “moral hazard,” holding out and not paying back their debts.

According to CCRS on Monday, January 17, the applications for debt restructuring numbered to an average of more than 1,000 per day during the middle of the previous month, but decreased to 602 on January 3; 694 on January 4; 760 on January 5; 737 on January 6; and 794 on January 7. For Saturday, January 8, only a mere 400 applications came in.

The number of consultations through the internet, phone calls, or visits usually done before applying for debt restructuring also dropped sharply. This seems to be from the vague hope spreading among credit defaulters that the “credit delinquent label” may be dropped with better conditions than the previous credit recovery system, and so they are waiting until March when the government announces the additional measures.

Those applicable for the government’s additional support is currently known to be the recipients of National Basic Livelihood Security Act, the low-income bracket and adolescents, and the beneficiaries are different from the credit recovery support system.

As the moral hazard is apprehended, Kim Young-joo, senior presidential secretary for economic affairs, is out to take the matter under control, saying, “We are not considering writing off the principal of the debtors in principle.”

Choi Gong-pil, senior researcher at Korea Institute of Finance, pointed out, “In order to prevent the moral hazard of potential credit delinquents, the government quickly needs to announce clearly the beneficiaries of the new measure.”

Kyung-Joon Chung news91@donga.com