A, who had a claim in arrears, recently received a notice of account seizure. A lend company that had made no particular collection efforts proceeded with the seizure process. On online communities, posts are piling up saying, "A lend company that had been quiet for years suddenly froze my account," and "It's an old claim, but a notice of impending compulsory execution arrived."
As the government is actively pushing the New Leap Fund, which buys long-term claims in arrears to help vulnerable borrowers get back on their feet, people on the ground say seizures and debt collection are instead increasing. With tighter regulations on debt collection making it harder to generate revenue by holding claims long term, lend companies are said to be hurrying to dispose of collectible claims.
According to the Monthly Court Statistics on the 24th, the number of "other executions," which account for 70%–80% of compulsory execution cases involving claims and property rights, rose about 8.3% from 275,009 in January–March 2025 to 297,713 in the same period this year. The March figure this year was 111,454, up 13.8% from a year earlier. Compulsory execution on claims and property rights is closely tied to claim seizure and collection procedures such as account and wage seizure.
Stricter regulations on debt collection are cited as a reason for the increase in compulsory execution. The financial authorities revised the Individual Debtor Protection Act last year so that even if a debtor loses the "benefit of time (the benefit enjoyed by a party until the due date)" due to loan arrears, lenders cannot charge arrears interest on the entire remaining balance.
For example, if a debtor who borrowed 10 million won falls into arrears this month on 500,000 won in principal and interest due, in the past a high arrears interest rate applied to 10 million won, not the 500,000 won in arrears. Now, arrears interest accrues only on the actual arrears amount of 500,000 won, and only the contracted interest applies to the 9.5 million won that has not yet matured. Lend companies can no longer collect more interest by holding claims in arrears for a long period as they did before.
The New Leap Fund introduced in Oct. last year is also a factor. The New Leap Fund buys long-term claims in arrears at 5% of principal and supports vulnerable borrowers' recovery through principal reduction or debt adjustment. The government is reportedly encouraging the lend sector to participate as it pushes to purchase long-term claims in arrears through Oct. this year.
However, because the amount receivable from selling long-term claims to the New Leap Fund is not large, it is in lend companies' interest to collect as much as possible on claims in arrears. Lend companies typically buy nonperforming loans at about 25% of face value and earn profits through collection. The lend industry argues it takes a loss if it sells claims in arrears bought at 25% of face value for a price of 5%.
A financial sector official said, "Since the COVID-19 crisis, lend companies have refrained from collection as much as possible in line with the financial authorities' recommendations," adding, "But if regulations keep tightening and it becomes harder to generate revenue, they could become more aggressive in collection work."