There is new information about about an explosive growth in consumers needing debt relief services. While demand is dropping in the U.S., that’s not true in other places.
According to newly released information, the demand for debt relief services grew by 10 percent last year. These services provided by Credit Counseling and Recovery Service (CCRS) step in and assist consumers that have been unable to repay their creditors over a three month period.
It’s a bit tough to get more detailed information about the opportunity but if your are interested in learning more you’ll have to go to Korea.
“In light of continuing adverse conditions in the Korean economy affecting consumers, in March 2009, the Financial Services Commission requested Korean banks, including Woori Bank, Kyongnam Bank and Kwangju Bank, to establish a “pre-workout program,” including a credit counseling and recovery service, for retail borrowers with short-term outstanding debt. The pre-workout program is expected to be in operation from April 13, 2009 to April 12, 2010. Under the pre-workout program, maturity extensions and/or interest reductions are provided for retail borrowers with total loans of less than (Won)500 million who are in arrears on their payments for more than 30 days but less than 90 days.”
A Bit of History
In light of the rapid increase in delinquencies in credit card and other consumer credit in recent years, and concerns regarding potential social issues posed by the growing number of individuals with bad credit, the Korean government has implemented a number of measures intended to support the rehabilitation of the credit of delinquent consumer borrowers. These measures may affect the amount and timing of our collections and recoveries on our delinquent consumer credits.
In 2002, the Financial Services Commission established the Credit Counseling and Recovery Service based upon an agreement among approximately 160 financial institutions in Korea. Upon application to the Credit Counseling and Recovery Service and approval by creditor financial institutions representing a majority of the outstanding unsecured debt and two-thirds of the outstanding secured debt, a qualified “credit delinquent person” with outstanding debts to two or more financial institutions in an aggregate amount not exceeding (Won)500 million may participate in an individual work-out program designed to restructure such person’s debt and rehabilitate such person’s credit.
On April 1, 2006, the Korean Debtor Recovery and Bankruptcy Law took effect and replaced the Individual Debtor Rehabilitation Law. Under the Korean Debtor Recovery and Bankruptcy Law, a qualified individual debtor with outstanding debts in an aggregate amount not exceeding threshold amounts of (Won)500 million of unsecured debt and/or (Won)1 billion of secured debt may restructure his or her debts through a court-supervised debt restructuring that is binding on creditors.
On September 2, 2008, to support consumer borrowers with low credit scores, the Financial Services Commission established the Credit Rehabilitation Fund to purchase from creditors the loans of such borrowers that are in default and to provide guarantees so that such loans may be refinanced at lower rates. [Sweet!]
The Credit Rehabilitation Fund provides support to (i) individuals with low credit scores who are in default on loans not exceeding (Won)30 million in principal amount in the aggregate (which requirement will be waived for individuals who are “basic living welfare recipients”) for a period of three months or more and (ii) individuals with low credit scores ranging from category 7 to 10 who are in default on loans not exceeding (Won)30 million in principal amount in the aggregate (which requirement will be waived for individuals who are basic living welfare recipients) and the interest rate of which is 30% or more.
In March 2009, the Financial Services Commission requested Korean banks, including Woori Bank, Kyongnam Bank and Kwangju Bank, to establish a “pre-workout program,” including a credit counseling and recovery service, for retail borrowers with short-term outstanding debt. The pre-workout program is expected to be in operation from April 2009 to April 2010. Apparently it is still in operation. Under the pre-workout program, maturity extensions and/or interest rate adjustments are provided for retail borrowers with total loans of less than (Won)500 million who are in arrears on their payments for more than 30 days but less than 90 days. – Source
The process in Korea is supposed to stop creditor collections activity once the consumer has contacted the Credit Counseling and Recovery Service.
“Some lenders send back our draft rescheduling proposals over and over. But eventually, more than nine of every 10 applicants get final approval from creditors,” said Kim Seung-duk, spokesman for the counseling agency. – Source
As of 2009 the CCRS service appeared to be running strong. What are you waiting for? Don’t let a little language barrier hold you back.
1. Credit counseling : 2,891,973
2. Debt-management plan : 809,155
3. Credit education : 1,899,945
4. Job search : 92,763
5. Micro-credit : 9,924, \ 29,440million
The nonprofit group Credit Counseling and Recovery Service is currently led by Lee Chong-Hwi, the former CEO of Woori Bank.
But the services of Credit Counseling and Recovery Service don’t end with just micro-credit or creditor workouts. Just recently they announced an agreement with three cell phone carries to partially write off long unpaid cell phone bills.
If we can’t get non-profit credit counselors to look at settling debt in the U.S. at least the Korean credit counseling group is making strides in exploring such options for their consumers.
When people work with the Credit Counseling and Recovery Service the consumer will not have to pay any interest on the balance and and part of the balance owed will be forgiven. The customers will be allowed to pay off the lowered balance for up to three years.
The Credit Counseling and Recovery Service estimates that 2.5 million people have failed to pay cell phone bills for more than six months.
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