No Credit Penalty for Loan Delinquency Repayment During COVID-19 Period

Financial Services Commission Holds Meeting with Financial Sector on COVID-19 Credit Recovery Support

Eun Seong-su, Chairman of the Financial Services Commission, held a private meeting on the morning of the 11th at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul, with the heads of the five major financial associations and the Director of the Credit Information Center to discuss measures to support the credit recovery of people who have fallen behind on their debts due to the prolonged impact of COVID-19.

[Asia Economy reporters Oh Hyung-gil and Kim Jin-ho] The government has decided not to penalize the credit ratings of individual debtors who failed to repay small loans on time and became delinquent after the COVID-19 crisis.

This is a kind of "credit pardon," where delinquency information incurred during the COVID-19 period will not be used when calculating credit scores. However, the benefit will only apply to those who have fully repaid their loans.

On the morning of the 11th, Eun Sung-soo, Chairman of the Financial Services Commission, held a private meeting at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul, with the heads of the five major financial associations and the head of the Credit Information Center to discuss measures to support the credit recovery of people who have fallen behind on their debts due to the prolonged impact of COVID-19.

This follows President Moon Jae-in's directive to support credit recovery for low-income earners. Earlier, President Moon instructed the Financial Services Commission to "prepare measures to support credit recovery for those who experienced delinquencies due to COVID-19 difficulties but repaid faithfully."

Currently, if a loan is not repaid, the credit score drops depending on the number and duration of delinquencies, resulting in higher interest rates on existing loans or difficulty obtaining new loans. Even if the delinquent amount is repaid faithfully, the delinquency information remains, causing disadvantages in other financial transactions.

Accordingly, if small delinquencies by individuals or sole proprietors incurred during the COVID-19 period are fully repaid, the sharing of such delinquency records within the financial sector and their use in credit evaluations will be restricted.

Eun Sung-soo, Chairman of the Financial Services Commission, held a private meeting on the morning of the 11th at the Bankers' Hall in Myeong-dong, Jung-gu, Seoul, with the heads of the five major financial associations and the president of the Credit Information Center to discuss measures to support credit recovery for people who have defaulted on loans due to the prolonged impact of COVID-19.

Participants also agreed to actively cooperate to ensure smooth implementation of measures such as selecting support targets and restricting the sharing and use of delinquency records in credit evaluation and loan screening management. Specific measures will be announced on the 12th.

After the meeting, Chairman Eun told reporters, "Since last year, we have extended loan maturities and deferred interest payments on a cumulative scale of 200 trillion won for small business owners and SMEs affected by COVID-19, so they did not incur delinquencies. Conversely, individual debtors did not receive maturity extensions or similar measures, resulting in delinquencies, which they may perceive as discrimination."

He added, "COVID-19 is a severe situation that may occur once in a hundred years, and it is necessary to stop sharing delinquency information among financial companies for borrowers who have completed repayment after delinquency. The support measures for credit recovery will be limited to those who have repaid their loans. Since the benefits are provided only to those who have repaid, we expect moral hazard issues to be minimized."

This content was produced with the assistance of AI translation services.