3 pres. candidates release plans to alleviate household debts

Park Geun-hye, the presidential candidate of the ruling Saenuri Party, on Sunday said she will try to alleviate household debts by creating a “national happiness fund” worth 18 trillion won (16.5 billion U.S. dollars).

She released her proposal following Moon Jae-in, her rival from the main opposition Democratic United Party, and independent runner Ahn Cheol-soo as the combined household debt figure exceeding 1,000 trillion won (919.5 billion dollars) has turned into a key policy issue in the Dec. 19 presidential election.

Experts say, however, that the debt alleviation measures suggested by the three candidates could cause moral hazard because they will require taxpayers’ money.

In a news conference at her party`s headquarters in Yeouido, Seoul on Sunday, Park said, “The household debts in the non-banking sector often used by low-income households are growing. If this trend continues, the financial system`s stability could be significantly affected.” She also announced three principles and seven policies.

Park’s solution focused on preventing low-income households having no credit delinquency but reeling from high interest rates or debt ratios from becoming delinquent borrowers. By doing so, she seemed to target low-income households who are willing to stand on their own feet but suffer from burgeoning debts.

Park also said her proposed national happiness fund will be raised by bonds worth 1.87 trillion won (1.72 billion dollars) based on the credit recovery fund of 870 billion won (800 million dollars) and the surplus of the delinquent loan fund of 300 billion won (275.8 million dollars) without direct injection of state funds.

Moon pledged the so-called Pieta three acts, which will create or revise three main laws -- the Interest Limitation Act, the Fair Lending Act and the Fair Debt Collection Act.

He plans to revise the Interest Limitation Act to lower the interest rate cap from 30 percent per year (39 percent for private lending) to 25 percent per year, and apply the same rule to the Credit Business Act. Under the plan, he said he intends to remove high interest rates by nullifying all contracts on interest in case of violation.

Moon also announced that he will push for a Fair Debt Collection Act that will make financial institutions lend money to borrowers after assessing their repayment capabilities.

Independent candidate Ahn released his solutions under the slogan of “repachage.” Under his plan, a “true new start” fund worth 2 trillion won (1.84 billion dollars) will be launched after funding from the government and financial institutions and will provide rent deposits with a cap of 3 million won (2,760 dollars) to bankrupt households and offer rehabilitation training subsidies to all credit delinquents for three months. He proposed cutting the restriction on financial transactions of credit delinquents from five to three years in an attempt to reduce the time for repachage.

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