Financial authorities are taking steps to prevent financial companies from evading responsibility for debtor protection after selling delinquent debts. Going forward, banks and credit card companies that originally issued loans will be required to verify whether illegal debt collection occurs after selling delinquent debts to other firms.
The Financial Services Commission announced on June 17 that it will pre-announce a revision of the "Debt Collection and Loan Debt Sale Guidelines." The revised guidelines are expected to be finalized next month and implemented immediately.
Previously, financial companies faced various regulations under the Personal Debtor Protection Act when they held and collected delinquent debts directly. These regulations included limits on the number of collection contacts, restrictions on contacting debtors during certain hours, and provisions to postpone collections in cases of surgery or hospitalization. Even when outsourcing collections to external firms, the original lenders were responsible for any illegal actions taken by those firms.
However, once delinquent debts were sold, financial companies could effectively escape their debtor protection responsibilities. This allowed them to recover debts quickly while reducing the burden of collection management. Consequently, as delinquent debts were resold multiple times, debtors often faced unexpectedly aggressive collection efforts or suffered negative impacts such as declines in their credit scores.
Under the new guidelines, original creditors must monitor the actions of the debt buyers even after the sale. If the buyer is found to have violated the Personal Debtor Protection Act or the Debt Collection Act, the original creditor must demand corrective action and report the findings to the Financial Supervisory Service within seven days.
The process of reselling debts will also be subject to oversight. Financial companies must specify the conditions for resale, including the possibility of resale, the duration of resale restrictions, and the debtor protection conditions that will apply during resale, in the debt sale contracts. This aims to ensure that minimal protective measures remain in place, even as debts pass through multiple companies.
The Financial Services Commission plans to establish a system for disclosing each financial company's debt adjustment performance, key details of debt sales, and the status of the expiration of debt claims. Regulations limiting the sale of debts under rapid debt adjustment by the Credit Recovery Commission will also be implemented in July.
* This article has been translated by AI.
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