New guidelines limit debt-collection calls

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New guidelines limit debt-collection calls

Private lenders can only make calls to collect debt twice a day. The same goes for financial companies, according to new guidelines.

The Financial Services Commission and the Financial Supervisory Service on Sunday laid out new guidance on debt collection that take effect today.

The target is to further ease the constant hassle people who borrowed money from loan sharks with high interest rate faces.

Under the guideline private lenders and financial companies can only reach out to lenders about their debt payments twice a day, whether it is through direct phone calls, e-mail, text messages or visits. Financial companies previously had to limit their collection calls to three times daily while private lenders had no limits. This is the first time that the debt call regulation has been applied to private lenders.

The companies also must inform borrowers of their plans to take action three days before they to so.

The target on limiting the pressure to collect debt applies to the 459 private lenders that have been registered under the FSC since July. Although this is only 8.1 percent of the 8,752 private lenders in the country, the debt balance for the 459 accounts for 88.5 percent of all debt borrowed from private lenders.

Additionally under the guideline, the financial companies are not permitted to pursue repayment of debt that has already passed its statute of limitation and cannot sell those rights to collect to debt collection agencies.

The debt is written off if the financial companies do not collect or take action to collect the debt within five years. However, there have been cases where debt collectors, including private lenders, purchases debt that has exceeded the five-year threshold.

If the borrower pays even a small amount of the debt when it has reached the statute of limitation, the borrower is bound to repay those debts.

Because of such actions, financial companies including private lenders will be restricted from selling debt that has reached their statute of limitation to companies debt collection agencies.

Additionally, when borrowers hire an attorney, private lenders are prohibited from visiting or directly contacting the borrower regarding the debt. Private lenders also are prohibited from contacting borrowers’ place of employment or family members.

Debt collection by private lenders has always been a major social issue as there have been numerous cases including those involving violence as employees of private lenders or debt collection companies have threatened borrowers even at their work place.

Since many who receive loans with higher interest rates are in the lower-income bracket, the government has been trying to ease their burdens including lowering maximum interest rates to 27.9 percent.

“There’s no legality that could force the companies to follow the new rule since it’s a guideline,” said Choi Seong-il, head of the IT and finance protection department at the FSC. “However, we will guide those that have violated and try to encourage the companies to voluntarily follow.”

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