High-priced consulting services targeting financially distressed borrowers are spreading among parts of the legal profession as an economic slowdown and high interest rates leave more people unable to repay their debts on time. In response, the Credit Counseling and Recovery Service has asked industry associations to help ensure that vulnerable borrowers can use debt restructuring programs based on accurate information.
Kim Eun-kyung, chairperson of the Credit Counseling and Recovery Service, signed a memorandum of understanding with Lee Kang-cheon, president of the Korea Association of Judicial Scriveners, on preventing harm to users of debt restructuring programs, financial industry sources said on the 9th. The agreement was signed the previous day at the association's headquarters in Seocho-gu, Seoul.
The two sides agreed to cooperate in providing accurate information about the programs to vulnerable borrowers, aiming to prevent unnecessary costs and improve access to legal services. Kim also visited the Korean Bar Association in late June to discuss support systems for financially distressed debtors.
Kim's back-to-back visits to the two associations follow the continued marketing of consulting services priced at 3 million to 4 million won to borrowers in arrears. While it is important for vulnerable borrowers to understand both the Credit Counseling and Recovery Service's debt restructuring programs and the court-led personal rehabilitation and bankruptcy systems and to choose the one that fits their circumstances, some providers have deliberately delayed cases or demanded excessive fees to turn the process into a source of profit.
In some cases, borrowers are encouraged to pay fees by credit card just before filing for personal rehabilitation or bankruptcy. An official at a credit card company said the firm uses its own fraud detection system to identify irregular transactions that may originate from law firms. See also this newspaper's June 24 edition, Page 10.
