[EDITORIALS]Let the private sector do itIn order to cope with the rapidly growing number of credit delinquents, the government has presented a relief measure. Its gist is restructuring longer-term loans or delaying their due dates. The current system of classifying debtors who owe more than 300,000 won ($256) that are behind by three or more monthly payments as credit delinquents and limiting their ability to borrow is a problem.
With high unemployment and an economic recession, the number of credit defaulters has risen to 3.3 million, and social problems such as family breakups, crime and suicides are on the rise. Some financial institutions have their own debt adjustment programs, but the terms and conditions of such programs are too strict to give effective relief. The government must provide a comprehensive relief plan.
To be precise, credit violations are an issue between the financial institution and the borrower. It is not right for the government to set a guideline for such categories as “defaulters with less than 10 million won arrears,” and order financial institutions to follow them.
Moral standards are sliding here. There are even malicious defaulters who believe that if they resist paying back loans, the loans will be written off. An easy escape from debt will make financial institutions falter and lead, ultimately, to the need for more bailouts with taxpayers’ money.
Therefore, the government’s role should stop at suggestions and recommendations. Let each financial company work with its debtors to give them a reasonable way to pay back their debts and get out from under their bad-credit burden But let them also make the delinquents accountable for some minimum responsibility for their defaults. With the legislative elections next year in mind, some politicians are advocating sweeping write-offs of principal and interest or an amnesty to all defaulters. Those proposals are a recipe for the ruin of the Korean economy.
We also worry that some credit card companies are showing signs of resuming their old vice of issuing cards almost at random. Here is an area where the government must step in to enforce reasonable credit standards.