One out of three debtors who received credit amnesty that deleted arrears history last year became delinquent again.
According to materials submitted by Yang-su Lee of the People Power Party, a member of the National Policy Committee, from NICE Information Service and Korea Enterprise Data (KODATA) on the 16th, of the 2,867,964 people who received credit amnesty last year, 955,559, or about 33.3%, had become delinquent again as of Jul. this year.
From 2021 through last year, the government implemented a credit amnesty program that erased arrears records if debtors with debts of 20 million won or less fully repaid their debts by May last year. However, one out of three debtors who received credit amnesty is repeatedly taking out loans and falling into arrears again.
As of the end of Jul., 665,787 beneficiaries of credit amnesty were still in arrears. The loan amount they failed to repay was 28.516 trillion won, averaging 42.83 million won per person.
Beneficiaries of credit amnesty mainly borrowed from the first- and second-tier financial sectors as their credit scores rose immediately after the amnesty. Their average personal credit score rose by an average of 31 points, from 653 to 684, and the average credit score for sole proprietors rose by an average of 101 points, from 624 to 725.
Among the beneficiaries of credit amnesty, 798,006 people borrowed 17.0717 trillion won from the second-tier financial sector, such as savings banks, insurance, cards and capital companies, and mutual finance institutions. A total of 396,612 people received 39.6612 trillion won in loans from banks. In the third-tier finance sector, including private lending businesses, 176,649 people received 4.612 trillion won.
Yang-su Lee said, "Indiscriminate credit amnesty can heighten the relative sense of deprivation among diligent repayers and spur moral hazard," adding, "The government should refrain from populist-style amnesties and devise measures to selectively help those who are determined to make a comeback."