Measure to avoid overdue feesStarting next year, anyone who is late on their credit card payments will be informed within two days. The move is to prevent any credit card users from being put into an unfavorable situation such as a downgraded credit score or a suspension due to overdue payments after late notifications from credit card issuers.
The Financial Supervisory Services on Sunday said the new reform measures will be implemented in the first quarter of next year. Currently only five of eight credit card issuers inform their clients of overdue payments within two days while the other three sent out such notices within three or as long as five days.
Additionally, under the new regulation, financial companies have to clarify in the contract that a special interest will be placed on overdue loan payments the day after the late payment starts. This is to prevent financial companies’ from applying a special overdue payment interest the day late payments started.
Financial companies will be forced to delete the information on overdue payments within the next five years when selling non-performing commercial loans that have reached their statute of limitation. Under the current law the financial companies are allowed to keep the information on overdue loans that have reached their statute of limitations until five years after the debt trade has ended. However, some financial companies have interpreted the law as continuing the debt trade relations when selling the loans to a debt collection agency and therefore keeping the information on overdue payments for more than five years after selling it.
In the case of commercial loans, if the financial institution doesn’t take necessary action in recollecting the debt such as mailing letters on late payments or filing a lawsuit, a loan that reaches its statute of limitations no longer need to be paid back by the person who borrowed the money. The statute of limitation in this case is five years after the last day that a payment should have been made.
There have been complaints of financial companies that have kept the records on overdue payments on commercial loans forcing some to face limitations on financial transactions.
In one case, a person who tried to sign up for an automobile installment loan from a capital company was denied because of an overdue payment record even though the financial court exempted debt payments after filing a bankruptcy report.
The FSC is also looking into deleting other overdue payment information including debt write-offs under bankruptcy and an individual’s debt restructuring program participation held by financial companies.
BY LEE TAE-KYUNG, LEE HO-JEONG [firstname.lastname@example.org]