Hanmaeum Finance, created to assist persons with bad credit with recovery, has had little effect in adjusting debt. Of the 180,000 people who have had their debts adjusted, half went overdue again six months later, and 15 percent have been unable to repay any debt for periods of more than three months. Assistance from Hanmaeum has been criticized as a "program to get people with bad debt to turn themselves in" since it is hard to find and keep track of them systematically.
Hanmaeum's failure was somewhat expected. It was unreasonable from the start to expect that people with little income would be able to repay their debts if you extended their deadlines. You have to assume that what happened was that most applicants sought assistance to temporarily free themselves of bad credit status and applied without really ever being able to repay in full.
Helping people recover requires that there is relief of their principal. Those who oppose that say it will cause "moral laxness." There is merit to that claim. However, the "looting lenders" who lent money to people unable to repay those loans and with their lives as collateral must also be held responsible. Lessening their principals to levels they can handle would also be a way for creditors to get more of their money back.
A revision of the law means the statistics are no longer maintained, but nothing has changed about the problem of personal bad credit. The government and the National Assembly should learn the lesson to be learned from the failure of Hanmaeum Finance and completely review policy so far. Instead of using personal bankruptcy or personal recovery, which require court judgments, there should be a debt adjustment program that involves the writing off of a person's principal, which would be almost as effective. There also has to be mid-term review and improvements if necessary, so that more people with bad credit can use the personal recovery system, which releases people from their debts if they make consistent payments for five years.
The Hankyoreh, 27 June 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] New Ways to Adjust Personal Debt Needed |
