The Financial Services Commission (FSC) approved a revised guideline on July 1 during its regular meeting, which includes provisions for the management of personal financial debts and the protection of individual debtors. This revision follows the announcement in February of measures to strengthen the management of personal delinquent debts in the financial sector.
The revised guideline classifies personal financial debts, for which a rapid debt adjustment agreement has been established and remains effective, as "restricted transfer personal financial debts." Consequently, financial institutions will be prohibited from transferring these debts to collection agencies or other entities.
Previously, when financial institutions sold personal delinquent debts, debtors could lose their relationship with the original financial institution and become targets for collection by purchasing agencies. Concerns have been raised that when credit card debts are transferred to collection agencies, it could lead to a decrease in individual credit scores.
Rapid debt adjustment is aimed at debtors whose delinquency period is less than 30 days or who are at risk of being unable to repay before delinquency occurs. The program offers support such as installment repayment over a maximum of 10 years, full waiver of delinquent interest, and a reduction of agreed interest rates by 30% to 50%. Last year, 53,659 individuals received support, with 65% of them not having incurred any delinquency yet.
Financial authorities believe that if a financial institution unilaterally sells debts while a debtor is promising and fulfilling diligent repayment before transitioning to long-term delinquency, it could undermine the purpose of the program. The revised guideline will take effect immediately upon approval and announcement by the FSC, applying to debt transfers occurring after its implementation.
The FSC will continue to pursue other follow-up measures related to strengthening the management of personal delinquent debts. It plans to establish a system for reporting and disclosing the debt adjustment performance of financial institutions, key details of debt sales, and the completion of the statute of limitations, with disclosures starting from the first half of this year. Additionally, a revised guideline for "debt collection and loan debt sales" is expected to be finalized and implemented in August.
* This article has been translated by AI.
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