CREDIT RECOVERY SUPPORT SYSTEM

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Some debtors who struggle to pay off their debts during the COVID-19 pandemic will be eligible for so-called “credit pardon.” Once they off their debts, their late payment records will not be disclosed for credit evaluation. Here’s an overview of the credit recovery support program.

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The prolonged pandemic has compelled many people to take out loans to run their businesses or to simply make ends meet. Compared to pre-pandemic years, nearly 10,000 more debt settlement requests have been made. When an individual’s debt payment is overdue, his or her credit rating falls and the late payment record remains for as long as five years even after the debt is settled. A credit recovery support program will be made available in early October to help such individuals. The key lies in withholding such overdue records from financial institutions and credit evaluation companies. This way debtors will be able to borrow money from other financial institutions, which would ultimately boost their credit ratings.

[Soundbite] Eun Sung-soo(Chairman, Financial Services Commission) : "Not using the financial information during the pandemic as if years 2020 and 2021 didn’t exist could help individual debtors recover credit ratings."

However, in order to prevent moral laxity, only those who paid off all their overdue debts will be eligible for this program. The program is for people who had paid off all their overdue debts of less than 20 million won between last January and the end of this month. It appears between two to three million people will be covered by this program.

[Soundbite] Prof. Sung Tae-yoon(Dept. of Economics, Yonsei Univ.) : "The program has the same effect as giving a fresh start for people with small debts who have the willingness to pay them off."

Financial authorities have supported individuals with small overdue debts in similar fashion during the 1997 financial crisis to help restore their credit ratings.