If Debt Collection Calls Exceed 7 Times a Week, Report It Please

Financial Supervisory Service Provides Precautions for Loan Users
Personal Debtor Protection Act Enforced... Guidance Period Until January 16 Next Year

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From now on, the number of debt collection contacts for all debtors will be limited to 7 times within 7 days. If subjected to excessive collection, one can report it to the Financial Supervisory Service (FSS) or other relevant authorities.

On the 5th, the Financial Supervisory Service provided guidance on precautions for users of loan businesses. From September 5th to the 16th of last month, the FSS conducted on-site inspections targeting 30 loan companies with a high proportion of small debtors and strong internal controls, in line with the enforcement of the "Personal Debtor Protection Act" which strengthens debtor protection. The FSS also shared major deficiencies found with the industry.

The inspection revealed that some loan companies manually checked whether notices for debt collection measures such as loss of benefit of term had been delivered, raising concerns about errors. Among purchase collection agencies, some did not even have an interest calculation system because they claimed they did not collect overdue interest.

Management of the debt transfer process was also inadequate. Currently, assignment contracts do not record transfer history, frequency, or whether the debt has been written off, so relevant information is not properly conveyed to the assignees. Additionally, cases were found where debtors were not informed that future interest would be waived when long-term overdue debts were transferred.

Collection management was also insufficient. Some companies did not automatically calculate or notify the number of collection attempts, and failed to separately manage legally excluded subjects, which could lead to incorrect calculation of collection attempts.

Regarding voluntary debt adjustment, adjustment criteria were inadequate, such as not considering the debtor’s repayment ability, and some companies lacked websites, resulting in insufficient guidance on necessary documents.

Based on the inspection results, the FSS plans to guide the loan industry to improve deficiencies within the grace period for the enforcement of the Personal Debtor Protection Act (October 17, 2024 to January 16, 2025). For companies not inspected, the Loan Business Association will conduct voluntary inspections, and supervision will be strengthened for deficient companies.

Newly established rights protection measures under the Personal Debtor Protection Act include differentiated protection measures according to debt size. For debtors with debts under 30 million KRW, even if overdue occurs, they are not required to comply with a notice of expected loss of benefit of term from the loan company. They can maintain existing loan conditions by paying only overdue interest.

Debtors with debts under 50 million KRW will not be charged overdue interest on portions not yet matured when receiving collection contacts such as pre-maturity repayment demands. If overdue interest is charged, it is invalid and can be reclaimed.

In particular, for unsecured debts under 30 million KRW, debts overdue for more than one year with no principal or interest payments in the past year will have future interest waived after transfer. Also, if the same debt is transferred more than three times, the debtor can request cancellation of the debt transfer.

Regarding collection contacts, the weekly limit of 7 times applies to all individual debtors. The FSS stated that if excessive collection beyond this limit is received, it can be reported through the Illegal Financial Report Center on the FSS website. Debtors need to keep records of contact details to secure evidence of collection.

Debtors can request to be contacted by no more than two methods among visits, phone calls, mail, text messages, and fax, and limit contact to within 28 hours per week to protect daily life. In cases of disaster, or personal/family accidents, illness, death, or marriage, collection contacts can be deferred once for up to 3 months.

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