[EDITORIALS]Debt rescue plan has flaws

After the government announced a plan to rescue blacklisted debtors, the number of people refusing to pay back what they owe is increasing. Financial service companies are suffering because of debtors who are delaying repayment in hopes of getting a write-down on their debt. Instead of “giving another chance to the people eager and able to pay back their debts,” the plan only encourages debtors to ignore their obligations.
The government is entirely responsible for such a result. Rumors had already been spreading that a plan to help blacklisted debtors would come out before the National Assembly elections. The economic team led by Deputy Prime Minister Lee Hun-jai announced a plan to “rescue” blacklisted debtors on March 10 without giving any details about standards. Debtors then began to put off repayment.
Of course, the government should not neglect the young people who were blacklisted due to only hundreds of thousands of won in overdue debt. A rescue plan is necessary because the blacklisted debtors, whose number reached 4 million, will cost the society and economy a great deal.
But the government officials made a great mistake in suggesting that the government could even write off the principal of debts. The interest rates on outstanding debts could be adjusted and the due dates of the debts could be rescheduled. But the principal of debts should never be reduced.
The government should be cautious in intervening in individuals’ debts. One example deals with the problem of debts in farm villages. If the number of blacklisted debtors increases as an economic recovery is delayed, the government will have to issue additional bailout plans.
First of all, the government should make it clear that it won’t offer additional help to debtors and won’t reduce the amount of principal they owe.
Second, the government should make the screening procedures rigorous. If people who do not borrow money or pay back debts honestly are made fools, the plan to rescue blacklisted debtors will not succeed. Such a policy will only draw criticism that the government came up with the plan with the elections in mind.