President Lee Jae-myung has formally ordered a review of "rescue first, recover later" relief for victims of jeonse fraud. The idea is for the state to reimburse jeonse tenants for deposits they were unable to recover. The previous administration blocked it, with the president exercising a veto (reconsideration request right) on the grounds that it was no different from shifting malicious landlords' debt onto ordinary citizens. A renewed debate over fiscal burdens and fairness appears inevitable.
According to the National Assembly and the government on the 17th, the Democratic Party of Korea and the Ministry of Land, Infrastructure and Transport (MOLIT) have begun reexamining a "special act on jeonse fraud" amendment centered on rescue first, recover later for victims of jeonse fraud, which was scrapped in the 21st National Assembly after the government exercised a veto. In a MOLIT policy briefing on the 12th, President Lee said of the rescue first, recover later support plan for jeonse fraud victims, "We officially promised it, so we must keep it," adding, "It will require a budget and many considerations, so please prepare it separately and report back."
Ahead of last year's general election, President Lee pledged to introduce this form of relief for jeonse fraud victims. The Democratic Party later submitted the special act amendment on jeonse fraud and passed it alone at a plenary session. However, former President Yoon Suk-yeol exercised a veto and it was scrapped.
Under the amendment's broad framework, a public institution would first return the deposit to the tenant and later recover the deposit from the landlord. Public institutions such as the Korea Housing & Urban Guarantee Corporation (HUG) would pay tenants the deposits they could not recover, purchase the rights to the deposits, and then replenish funds through claims for indemnity, court-ordered sale or auction of dwellings, and other debt collection.
The problem is that the likelihood of recovering the full deposits is very small. Last year, the Ministry of Land, Infrastructure and Transport (MOLIT) estimated that 36,000 tenants who suffered jeonse fraud would be unable to recover an average of 140 million won each, totaling 5 trillion won. Of that, only 1 trillion to 2 trillion won would be recoverable, with public institutions expected to shoulder the rest. At the time, MOLIT opposed the measure, saying, "If the rescue first, recover later clause is implemented, trillions of won in taxpayer money will be injected and a substantial portion will not be recovered."
HUG's fiscal operations are flashing warning lights. Due to expanded jeonse guarantees and policy lending and rising costs for public rental projects, the housing & urban fund's surplus fell sharply from 49 trillion won in 2021 to 12.2 trillion won as of the end of Oct. There is also criticism over using the housing & urban fund, which finances newborn special loans, Didimdol and Bogeumjari loans, and the supply of rental dwellings, for non-designated purposes.
There is also considerable criticism that the state should not take responsibility for compensating damages arising from private transactions and that taxpayers should not share that burden. The fairness question of why the government would compensate only jeonse fraud victims is also likely to grow. An academic who requested anonymity said, "In the case of voice phishing fraud, which is cited along with jeonse fraud as a representative type of scam, there is a voluntary compensation system, but the compensating parties are financial companies such as banks," adding, "The structure is also not unconditional full compensation but compensation based on a responsibility-sharing standard after determining negligence. Saying the government will compensate by indiscriminately buying bad debts with little chance of recovery does not square with fairness."