Bad Debt Rises With Card Use

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Bad Debt Rises With Card Use

There were over 2 million delinquent consumer borrowers as of the middle of last month, the country's financial regulator said Thursday.

Individual borrowers with payments in arrears numbered 2.02 million on March 13, the Financial Supervisory Service said, or 2.12 million if loans to sole proprietors of businesses are included, and over 3 million including other business loans and persons on the delinquency list from earlier financial problems.

"We found that many people who recently cleared up their unpaid loans were still restricted in some way in their financial activities," an official at the financial agency said.

A Korea Federation of Banks regulation says persons who are one year behind in payments remain on a watch list for three years. The records of those who were in arrears from six months to one year are maintained for two years; less than six months in delinquency means a one-year listing. Nearly half of the delinquent individual borrowers were in trouble because of credit card debt, the agency said. Delinquent individual borrowers who were in arrears in credit card payments totaled nearly 1 million, or 49 percent of the individuals behind on their obligations. Over three-quarters of delinquent credit card borrowers had outstanding balances of 5 million won ($3,660) or less. Over 40 percent of total delinquents fell into that class.

The highest proportion of personal credit delinquency was among people in their forties, nearly 35 percent, and those in their thirties, nearly 30 percent. People in their thirties and forties were also most commonly in credit card delinquency; younger credit card debtors represented just over 10 percent of the delinquents.

As the number of borrowers with troubled credit history passed 3 million, the government said it is concerned about the potential increase in the people resorting to private money lending.

Seoul recently decided to set aside private loan contracts with usurious interest rates. The government is also reviewing changes to the regulatory system to allow debtors to clear their names more quickly. Regulatory officials said they are considering a change to the present rule that clears the credit history immediately of persons who pay off delinquent loan balances of 1 million won or less. The change under consideration would hike the limit to 2 million won.




by Chung Sun-gu

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