Some borrowers who apply for debt restructuring through the New Start Fund are waiting up to nearly a year for a final agreement to be signed, a delay that critics say pushes back their return to normal financial transactions because overdue-payment records are cleared only once the agreement is in place.
Posts on the official online community of the Credit Counseling and Recovery Service show a series of cases in which applicants for the New Start Fund's debt-purchase restructuring waited several months or longer for a final agreement, according to financial industry sources on the 23rd. Some received a provisional restructuring plan but had still not signed an agreement months later, while others received a final plan about a year after applying.
Under the New Start Fund's debt-purchase program, the Korea Asset Management Corporation, or Kamco, buys claims from financial companies, reviews a borrower's ability to repay and then provides support such as principal reduction and long-term installment repayment. Debt collection stops as soon as an application is filed, but existing overdue-payment records are cleared only when the final agreement is signed.
Overdue-payment records restrict new loans and credit card issuance. Once an agreement is signed, the overdue record is replaced by a public record of debt restructuring, which is removed only after a year of on-time repayment. If it takes close to a year to reach an agreement, normalizing financial transactions can take about two years in total.
One reason for the delays is that many applicants owe money to multiple lenders, which makes gathering and negotiating claims information from several financial companies time-consuming. Still, critics say the program is meant to help borrowers get back on their feet, so the delay in restoring access to financial services needs to be addressed.
"Being restricted for a long period before returning to normal financial transactions can be a burden," one financial industry official said. "Given the purpose of the support, the process needs to be shortened as much as possible."
