Financial Services Commission to Promote "Discounted Dividends"... Victims of Jeonse Fraud to Recover More Security Deposits

In the future, victims of jeonse fraud who have previously struggled to recover their full rental deposit are expected to be able to reclaim a greater portion of their funds.

원본보기 아이콘

On March 13, the Financial Services Commission held a 'Banking Sector Roundtable' with major banks such as KB Kookmin Bank and the Korea Federation of Banks to discuss support measures for victims of jeonse fraud, including the new initiatives outlined above.

Since the enactment of the Special Act on Support and Residential Stability for Victims of Jeonse Fraud in June 2023, the government has been operating a support program for victims. Even if a victim of jeonse fraud is unable to repay their existing jeonse loan due to damages, the registration of delinquency information has been deferred to ensure they can continue normal financial transactions. Furthermore, for debts that remain unpaid after the auction of the damaged property, a program has been established to allow for long-term installment repayment for up to 20 years. Additionally, if a victim acquires the property through auction, regulatory requirements on loans (such as DSR and LTV) are being relaxed.

At this roundtable, in addition to existing support programs, a 'discounted distribution plan' for overdue bank mortgage loan claims related to jeonse fraud properties was discussed. The Financial Services Commission expects that, if banks implement discounted distributions, victims who are unable to recover the full amount of their rental deposit will be able to reclaim a larger sum.

Normally, when a bank holds overdue mortgage loan claims, the property is subject to court or public auction to recover the debt, with the distribution of proceeds prioritizing the senior mortgage holder, typically the bank. Under the discounted distribution plan, banks holding overdue mortgage loan claims related to jeonse fraud properties would apply for a lower distribution amount during the auction process. The difference would then be distributed to the next priority right holder, namely the victim.

The banking sector plans to further specify the scale and application methods of the discounted distribution plan, taking into account the level of victim support under the proposed amendments to the Special Act on Support and Residential Stability for Victims of Jeonse Fraud currently being discussed in the National Assembly. In addition, the banks intend to quickly implement the discounted distribution plan for overdue mortgage loan claims related to jeonse fraud properties according to each bank's internal procedures.

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.