Jun Ji-hye, a reporter at the finance desk of The Korea Times, focuses primarily on economic policy and government agencies, mainly covering the Ministry of Finance and Economy, the Ministry of Budget and Planning, the National Tax Service and the Korea Customs Service. She previously covered financial authorities, including the Financial Services Commission and the Financial Supervisory Service, and earlier worked on the political, city and business desks, reporting on a wide range of issues.
Card issuers on alert over potential delinquencies following gov’t credit amnesty
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By Jun Ji-hye
Credit card companies are expressing concern over potential risks to credit quality following the government’s recent large-scale credit amnesty, industry officials said Thursday.
While around 290,000 people are now eligible to receive new credit cards under the amnesty, historical trends indicate a significant chance many of these individuals will become delinquent again.
On Sept. 30, financial authorities implemented an amnesty, reinstating the credit of individuals and small business owners who have fully settled overdue debts.
The program applies to overdue debts of up to 50 million won ($35,000), acquired from January 2020 through August this year, that are either already repaid or will be paid in full by the end of the year.
The latest amnesty will restore the credit of some 3.7 million people, including 2.95 million individuals and 750,000 small business owners.
Credit for 2.58 million people will be reinstated immediately, and delinquencies will be erased. Those who have yet to repay their debts in full will see their credit scores increase, as long as overdue amounts are settled by the end of the year.
Following credit recovery, some 290,000 people will be eligible to obtain new credit cards, having restored their credit scores to meet requirements.
Although this is expected to provide card issuers with an opportunity to attract new customers, the industry remains cautious, given the high likelihood that some beneficiaries may become delinquent again.
In March 2024, a similar large-scale amnesty was carried out by financial authorities, covering individuals and small business owners with overdue debts of up to 20 million won incurred between Sept. 1, 2021, and Jan. 31, 2024. At the time, around 2.64 million individuals and 175,000 small business owners who fully settled their debts by the end of February had their credit restored.
Industry officials noted that following that amnesty, delinquency rates began to rise in the second half of last year.
According to data from the Financial Supervisory Service, the overall delinquency rate among eight major domestic card issuers increased from 1.47 percent at the end of March last year to 1.61 percent a year later, a rise of 0.14 percentage points.
Woori Card and KB Kookmin Card saw larger increases of 0.41 percentage points and 0.29 percentage points, respectively.
Data from Rep. Lee Yang-soo of the main opposition People Power Party showed that about one-third of last year’s credit amnesty recipients — about 956,000 people — fell back into delinquency.
Concerns are growing among card issuers as managing credit quality has become increasingly urgent, especially at a time when delinquency rates have reached their highest level in the decade since 2014.
“Card companies gain short-term benefits when people with restored credit obtain new cards and use them or take out card loans,” an official from one of the major card issuers said. “However, delinquency rates typically rise three to five months after large-scale credit recovery, so we are closely monitoring the potential effects of the latest credit amnesty.”