The Financial Services Commission said it plans to integrate the currently bifurcated purchased debt collection business and commissioned collection business. The Financial Services Commission (FSC) said it will push this plan after strengthening oversight of the sector through the purchased debt collection licensing system now being pursued.
Purchased debt collection refers to buying debt in arrears from financial firms at a discount and earning collection profits, while commissioned collection refers to collecting delinquent debt on behalf of others.
On the 28th, Lim Hyeong-jun, Director of the Financial Services Commission (FSC) household finance division, said, "Looking at overseas cases in the United States and Japan, a single company handles all tasks without distinguishing between commissioned collection and purchased collection. Through the implementation of this licensing system, we will 'level up' the purchased collection industry and then proceed to integrate the two sectors."
Regarding the background for introducing the licensing system, the Director said, "During the COVID-19 period, sales of individual debt in arrears were restricted, reducing market supply, and collection firms have been engaging in excessive competition to secure debt, which is their operating asset. As a result, debt prices have risen, exacerbating problems with prolonged and excessive collection."
Lim said, "There continue to be cases of excessive collection, such as tracking a debtor's bank account opening information and repeating seizures. Through the licensing system, we aim to make the purchased collection industry value reputation like the banking sector, thereby reducing excessive collection."
The Financial Services Commission (FSC) said the same day it will shift the purchased debt collection business from the current registration system to a licensing system. Licensing requirements include more than 50% equity investment by a financial company and capital of at least 3 billion won; suitability and soundness of the business plan; a major shareholder with sufficient investment capacity, sound financial status, and social credibility; and securing expertise. The Financial Services Commission (FSC) is currently preparing detailed licensing standards.