Inclusive finance policies are aimed at providing financial support to the most vulnerable and marginalized groups to help them gain new opportunities and get back on their feet, thereby creating a virtuous cycle between financial inclusion and economic growth. A variety of government-sponsored microloan products are available for low-income individuals and those with unfavorable credit records. In addition, debt adjustment programs are available for delinquent debtors, offering an extended payment period, amortization, interest rate reduction and debt reduction. Consumer protection is a key area of inclusive finance policies. In this regard, the new legislation on financial consumer protection passed at the National Assembly in March 2020 aims to protect consumers from misselling and other unfair sales practices of financial companies while strengthening consumer rights and empowering consumers to make informed decisions about their investment and asset management.
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Oct 16, 2024
- Personal Credit Management and Debtor Protection Act Takes Effect from October 17
- The Financial Services Commission announced that the newly legislated Personal Credit Management and Debtor Protection Act (the Act hereinafter) will go into effect from October 17. The new legislation passed by the National Assembly at the end of last year was promulgated in January this year, and the Enforcement Decree of the Act was also approved by the government at the cabinet meeting held on October 15, paving the way for implementing the law from October 17. Background So far, the personal delinquent debt management system has been largely dependent on the public sector-driven debt workout process made available through the Credit Counseling and Recovery Service (CCRS) and the courts bankruptcy proceedings, instead of having financial companies taking preventive steps beforehand by entering into negotiations with individual debtors. In this regard, the primary focus of financial companies has been maximizing their debt collection by delegating the function of debt collection activities to third parties or selling off debt to credit businesses. When debtors fail to make repayments on schedule, they become easily exposed to the growing burden of interest payments, which places them at risk of falling into long-term delinquency and facing excessive burden over debt collection. Against this backdrop, the Act was enacted in January this year for implementation from October 17 to help prevent defaults in a preemptive manner, thereby minimizing social costs associated with personal delinquency, and to seek an appropriate balance in terms of the rights and obligations of financial companies and debt collectors on the one hand and individual debtors on the other. In this regard, the Act and its subordinate regulations mainly deal with the following provisions(a) establishing a legal ground for financial companies to provide debt workout service of their own to individual debtors, (b) easing excessive interest burden on late payments, (c) strengthening rules on the sal
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Sep 24, 2024
- Revised Rules on Microfinance Support Expected to Increase Availability of Funds for Inclusive Finance
- The Financial Services Commission announced that a revision bill for the Enforcement Decree of the Microfinance Support Act was approved by the government at the cabinet meeting held on September 24. This revision bill is aimed at ensuring stable foundations for supplying microfinance assistance to vulnerable groups as the need to provide policy-based microloan products has been growingagainst the backdrop of the continuation of challenging economic conditions, such as high interest rates and high prices. In this regard, the revised rules will temporarily (a) increase the common rate of microfinance contributions financial companies are required to make, while (b) offering an incentive of reduction in the differential contribution amounts (which are determined by financial companies subrogation rates) to those making active efforts in supplying policy-based microloan products. First, the common rate of microfinance contributions financial companies make in relation to the size of their household loans, which currently stands at 0.03 percent, will be increased by 0.005 percentage points for banks to 0.035 percent and by 0.015 percentage points for insurance companies, mutual finance businesses, specialized credit finance businesses, and savings banks to 0.045 percent. The increased common contribution rates will be in place until December 31, 2025. This is expected to help expand the availability of funds for guarantees intended to supply policy-based microfinance assistance. Second, financial companies that are making active efforts in supplying policy-based microloan products will be eligible to receive a reduction in the amount of microfinance contributions they are required to make in relation to their subrogation rates (differential contribution rates) on a temporary basis until December 31, 2025. It aims to lower financial companies burden of differential contribution amounts, which are determined by their subrogation rates, for those with outstanding records i
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May 29, 2024
- Loan Transfer Service Offering Lower Interest Rates to be Made More Accessible and Inclusive
- The Financial Services Commission held a meeting with users of the loan transfer service program and officials from related organizations and financial companies on May 29 to commemorate one-year anniversary of launching the loan transfer service and have discussions on seeking further improvements. At the beginning of the meeting, FSC Chairman Kim Joo-hyun praised the successful introduction of loan transfer servicefirst for credit loans in May 2023 and then expanded to home-backed mortgage loans and jeonseloansduring the first year of its operation. As a result, Chairman Kim said that about 200,000 individuals were able to use this program to switch their existing loans worth about KRW10 trillion in total for lower interest rates, and on average were able to save about KRW1.62 million a year in interest payments. To continue to meet consumer demands, Chairman Kim said that financial companies need to think beyond just offering lower interest rates and take steps to help improve consumer convenience in accessing and operating loan transfer service, for instance, by offering on-site application process for the elderly to make the program more accessible and inclusive for all. During the first year of operation, in cumulative terms as of May 24, 2024, there were 202,461 individuals who took advantage of the loan transfer service and switched to lower interest rate loans. The total amount of loans switched for lower interest rates during this period amounted to about KRW10.1 trillion. For credit loans, which became available on May 31, 2023, 168,254 individuals used the loan transfer service for about KRW3.97 trillion. On average, their interest rates dropped by 1.57 percentage points, and borrowers were able to save about KRW580,000 a year per person. For mortgage loans, which became available on January 9, 2024, 24,721 individuals used the loan transfer service for about KRW4.54 trillion. On average, interest rates dropped by 1.49 percentage points, and borrowers we
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May 20, 2024
- FSC Proposes Rule Changes to Ensure Steady Supply of Funds for Microfinance Assistance
- The Financial Services Commission proposed rule changes in the Enforcement Decree of the Microfinance Support Act to ensure the provision of steady supply of funds for microfinance assistance on May 20. The Korea Inclusive Finance Agency (KINFA) has been expanding the level of microfinance support being provided to vulnerable individuals in recent years against the backdrop of the COVID-19 pandemic, continuation of high interest rates and high prices, and the growing need to protect vulnerable borrowers and prevent damages caused by illegal private lending activities. With interest rates and prices expected to stay higher for longer, there is a continuing need to bolster the provision of microfinance assistance to help vulnerable individuals. In this regard, the FSC is announcing a revision proposal for the Enforcement Decree of the Microfinance Support Act, which will temporarily increase the rate of contributions financial companies make in relation to the size of their handling of household loans, while providing a temporary reduction in the required amount of contributions for financial companies that are actively supplying policy-based microloan products. First, the rate of contributions financial companies make in relation to the size of their household loans will increase by 0.005 percentage points in the banking sector to 0.035 percent and by 0.015 percentage points for insurance companies, mutual finance businesses, specialized credit finance businesses, and savings banks to 0.045 percent. Currently, all financial companies are subject to the same contribution rate of 0.03 percent. The increased contribution rates will be in place until December 31, 2025. Second, a reduction of 0.5 percentage points in contribution amounts will be granted to the financial companies making active efforts in handling policy-based microloan products until December 31, 2025. KINFA will evaluate the performance of financial companies in supplying policy-based microloan products.
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Mar 12, 2024
- Provision of Prompt Credit Recovery Support Available for Borrowers in Payment Delinquency
- The Financial Services Commission announced that prompt credit recovery support will be provided to borrowers in payment delinquency starting from March 12. The credit recovery support will be provided to the borrowers who accrued delinquent payment history of up to KRW20 million between September 1, 2021 and January 31, 2024 and will havefully paid off their late payments by May 31, 2024. According to relevant credit information agencies, there are some 2.98 million individuals and 310,000 individual business owners in payment delinquency. Among them, about 2.64 million individuals and 175,000 individual business owners were found to have completely paid off their late payments as of the end of February 2024. Starting from today, borrowers with delinquent payment history can check their eligibility on the website of individual credit rating and information companies. For those who have already paid off their late payments, their credit scores will be increased automatically without the need to apply for this separately. For the rest of the borrowersabout 340,000 individuals and 135,000 individual business owners who have yet to completely pay off their late paymentsthe credit recovery support will be provided once they have paid off their late payments in full by May 31, 2024. Moreover, starting from today, the period for keeping and making use of borrowers debt adjustment records by Korea Credit Information Services will be reduced from two years previously to one year. Accordingly, if the borrower has faithfully made payments in accordance with the debt adjustment plan agreed by the lender for one year, his or her debt workout history will no longer be shared with financial institutions after one year. According to Korea Credit Information Services, about 50,000 individuals will benefit from this change. Attending the event commemorating the launch of prompt credit recovery support today, FSC Chairman Kim Joo-hyun said that the credit support programs being intro
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Feb 01, 2024
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Jan 31, 2024
- Government and Financial Industry Announce Programs to Help Reduce Interest Rate Burden on Small Merchants
- The Financial Services Commission announced that the government and the financial industry will provide interest rate support programs to help small merchants. First, banks will begin to offer refunds on interest payments to small merchants from February 5. A total of KRW1.36 trillion in interest refunds will be given to about 1.87 million small merchants who made interest payments at over 4 percent interest rates in the year of 2023. The amount of refund expected to be given to each small merchant on average is about KRW730,000. There is no need to apply for interest refunds as individual banks will contact small merchants with details. The first round of refunds will take place between February 5 and 8. Combined with the quarterly interest refunds of about KRW0.14 trillion, banks will be able to return about KRW1.5 trillion in interest refunds in total. Aside from this, banks are planning to offer KRW0.6 trillion in support for vulnerable groups, specific plans for which will be finalized at the end of March. Small merchants who borrowed from savings banks, mutual finance unions and specialized credit finance businesses can also receive interest refunds if they have business loans from nonbanks with interest rates between 5 percent and 7 percent. It is expected that about 400,000 individuals will be eligible to receive interest refunds amounting to maximum KRW1.5 million per individual. The nonbanks interest refund program will open in mid-March and begin providing refunds from March 29. Since September 30, 2022, the FSC and Korea Credit Guarantee Fund (KODIT) have been operating a low interest rate refinancing program for small merchants. Through this program, small merchants were able to refinance their business loans at much lower interest rates, switching from about 10.06 percent interest rate previously to 5.48 percent on average. Previously, this program was designed to provide support for switching small business loans that were issued on or before the last
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Jan 15, 2024
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Jan 11, 2024
- FSC Chairman Attends Meeting on Credit Recovery Support
- Chairman Kim Joo-hyun of the Financial Services Commission attended a meeting held at the National Assembly on January 11 on the issue of providing credit recovery support for individuals and small business owners. At the meeting, participants talked about the difficult circumstances experienced by those who have acquired late payment history on loans due to COVID-19, high interest rates and high inflation, even when after they are finished with making payments on their loans due to a prolonged stigma attached to credit delinquency for a certain period of time. In this regard, considering the severity of economic situation, FSC Chairman Kim asked the financial sector to seek active ways to provide credit recovery support as it was previously made available during the similarly difficult times in January 2000, May 2001 and August 2021. More specifically, Chairman Kim asked the financial sector to make assistance available for the borrowers who accrued late payments of maximum KRW20 million between September 2021 and January 2024 and have completely paid up their late payments in full, as an extension of the same credit recovery support measure made available for them since August 2021. In addition, Chairman Kim said that the individual debt restructuring program offered by Credit Counseling Recovery Service needs to be bolstered to take into account the fact that about forty percent of delinquent borrowers are those who are behind their mobile phone bills. In this regard, Chairman Kim added that an integrated and more comprehensive debt restructuring program needs to be made available, joined by telecommunication service providers. The financial sector agreed to finalize a plan on credit recovery support by early next week. The authorities expect that some 2.9 million individuals will benefit from the credit recovery support as their credit delinquency history will be erased from the record. * Please refer to the attached PDF for details.
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Jan 05, 2024
- Authorities Plan to Introduce a Total Platform for Microfinance Assistance Available from June 2024
- Chairman Kim Joo-hyun of the Financial Services Commission visited an inclusive finance support center operated by Korea Inclusive Finance Agency in Seoul on January 5 and held talks on the governments plan for microfinance support for this year with officials from relevant organizations participating. In his opening, Chairman Kim first talked about some of the efforts made by the government to boost assistance for vulnerable groups in the previous year. The size of policy funds supplied for microfinance assistance last year was the largest ever, amounting to some KRW10.7 trillion. Moreover, a total of KRW95.85 billion in small-sum living expense lending assistance was provided to those who lacked any income sources or fell behind debt payments. Along this line, authorities updated various assistance programs to strengthen financial inclusion and made available a comprehensive consulting and counseling program linking supports for employment, social welfare, debt restructuring and so on. For this years microfinance policy plan, Chairman Kim said that the government will focus on boosting convenience for end-users and assisting those in need to regain footing on their own. To this end, the government plans to launch an online total platform for microfinance assistance for operation from the first half of this year. The platform will help to guide users to find the most suitable microfinance products according to each users personal needs and situation and offer one-stop application service as well as the consulting and counseling support program. Developing this platform will mark the first step towards making the provision of microfinance assistance more efficient and user-oriented, since it will provide more personalized and comprehensive search results for comparison, while allowing users to search, compare, choose and apply all from a single platform. In order to tackle challenges facing vulnerable groups, Chairman Kim said that it is important to ensure the avai
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Dec 28, 2023
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Dec 21, 2022
- FSC Holds Seminar and Unveils Measures to Protect General Shareholders in M&As via Stock Transfer
- The FSC held a seminar with the Korea Exchange (KRX) and the Korea Capital Market Institute (KCMI) on December 21 and announced measures to protect general shareholders in corporate mergers and acquisitions (MAs) via stock transfer. In his opening remarks, FSC Vice Chairman Kim so-young spoke about the purpose of the seminar and suggested the governments policy direction as follows. Summary of Vice Chairmans Remarks Corporate mergers and acquisitions in domestic market mostly take place in the form of stock transfers. However, it has been suggested that ways to protect general investors in that process havebeen inadequate thus far. The European Union and Japan, for example, provide protection for general investors by mandatory bid rules, while the United States protects the rights of general shareholders through the strengthened role of board of directors and the advanced system of civil procedure. As such, when a change in the ownership status of management right takes place, the government plans to grant the shareholders of the acquired company an opportunity to sell their shares to the acquiring company. This will help improve the principle of equal treatment of shareholders by enabling general shareholders to share the control premium of the company just like the controlling shareholder. In the meantime, the government will seek a balanced approach to promoting MAs while protecting general shareholders at the same time. In this regard, authorities will prepare compensatory measures to ensure that there is no weakening of the positive function of MAs, which is creating synergistic effects between businesses. With todays announcement, the new administrations policy initiatives to protect general investors in capital markets have all been introduced. For the measures requiring a legislative process, authorities will prepare relevant bills to ensure prompt implementation. Key Measures I. Background and Overview When an entity acquires control of a listed company thr
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Dec 13, 2022
- New Legislative Bill on Individual Debtor Protection Approved at Cabinet Meeting
- The government approved a new legislative bill on the management of individual financial debt and the protection of individual debtors at a cabinet meeting held on December 13. This bill aims to strengthen rules regarding creditor financial institutions financial debt and the protection of individual debtors. Background Since personal credit loans became widely prevalent in the 2000s, authorities have made a series of improvements to arrive at the current framework on the individual debtor protection system.As a result, considerable improvements have been made in how debt collection should be carried out. However, from the perspective of individual delinquent debtors, it has been pointed out that they still face excessive penalty fees for overdue debt and harsh debt collection because of the following reasons. First, there exists no legally supported process through which a debtor can directly bargain with a financial institution to enter into a debt settlement quickly.Second, the currently available Fair Debt Collection Practices Act has limits in its capacity in terms of providing support for debtors recovery and enhancing their rights and interests because it passively prohibits certain types of debt collection activities such as assault, battery and threat. Third, collection on delinquent debt held by creditor financial institutions are increasingly being performed by third parties via entrustment and transfer, which led to debt collection practices with negligence on consumer protection and a focus on demanding debt payment. In order to address these issues, authorities have prepared a system of rules aimed at achieving proper balance in the rights and obligations of creditor financial institutions, debt collectors and individual debtors. Key Details a) Scope of rules and definitions: This bill sets forth rules regarding the overall management of individual financial claim after it becomes delinquent. The term individual financial claim means a debt claim held
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Nov 18, 2022
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Jul 06, 2022
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Jun 02, 2022
- Debtor Assistance with Legal Representation and Litigation Services Available at Free of Charge
- The FSC unveiled an overview of the current status on the use of debtor assistance with legal representation program on June 1. In 2021, a total of 1,200 victims of illegal private lending or debt collection activities applied for support in 5,611 cases and debtor assistance with legal representation was provided in 4,841 cases in total, which signifies that the debtor assistance program has become a crucial social safety net for damages inflicted by illegal private lending. The authorities plan to continue to make efforts to prepare for a rise in demand for remedies from illegal private lending by strengthening ties with various types of inclusive finance measures and securing sufficient fiscal resources, while working to stamp out illegal private lending by closely cooperating with investigative authorities. Overview Since January 28, 2020, the government has been offering the debtor assistance with legal representation programat free of charge to help victims of illegal debt collection activities done by both registered and unregistered money lenders and to support those that have fallen prey to exorbitant interest charges in excess of the maximum legal lending rate. When a victim of illegal private lending applies to seek support through the Financial Supervisory Service (FSS)s website or via a phone callplaced to the illegal private lending help center or the Korea Legal Aid Corporation (KLAC), attorneys from KLAC provide assistance with legal representation in dealing with illegal private lenders and for litigation services at no cost to debtors. (Legal Representation for Handling Debt Collection Issues) KLAC attorneys provide service of handling debt collection issues with creditors (money lenders) in place of debtors in order to help debtors avoid any harm caused by illegal debt collection activities. (Litigation Services) For damages incurred by exorbitant interest charges in excess of the maximum legal lending rate and illegal debt collection activities, K
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Mar 21, 2022
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Feb 24, 2022
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Feb 07, 2022
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Dec 29, 2021
