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FSC urges debtors to negotiate payback

Card-debt negotiation mechanism * The Financial Supervisory Commission said more than 11,000 people had applied to use its debt-negotiation program. It urged more people to use the mechanism. * Debtors should apply in person to their creditor bank. * A debtor's main creditor bank must halt any debt-collecting activity on the third business day after the application is received. * Banks must complete each application within a maximum of 13 business days.

Financial regulators yesterday urged more debt-ridden credit and cash cardholders to participate in a card-debt negotiation mechanism that has helped resolve bad debts cases.

From Jan. 1 to Feb. 18, the mechanism received 11,946 applications and has wrapped up 7,323 cases, the Financial Supervisory Commission told a press briefing.

A total of 5,841 of the completed cases reached an agreement on a payback plan, representing a success ratio of 80 percent and total debt of NT$10 billion (US$308 billion), the commission added.

Debtors should apply in person or through their relatives to their major creditor bank for a debt solution, instead of depending on ineffective suggestions by private credit brokers or other third parties, said Gary Tseng (曾國烈), director general of the commission's Banking Bureau.

Creditor banks should halt debt-collecting activities on the third business day after the major creditor bank receives an indebted borrower's application, to avoid facing serious penalties, Tseng said.

The major creditor bank should wrap up each debt negotiation application within between eight and a maximum of 13 business days, he said.

According to estimates from the banking bureau last month, potential bad debts amount to around NT$20 billion, or about 2.5 percent of total credit and cash card lending of NT$800 billion.

The performance of the nation's credit card market is expected to continue to worsen for a while and it will take time to ride out the storm, said Marie Lam (林慧敏), vice president and senior analyst with Moody's Asia Pacific Ltd, at a press conference yesterday in Taipei.

Lam used the example of South Korea, which required about two years to stabilize performance, to suggest that it would take time for the market to return to normal.

South Korea had encouraged commercial banks to increase credit to private firms and domestic consumers in a bid to boost its economy after the 1997-98 Asian financial crisis, even offering tax breaks for consumers for paying by credit card. But the fast credit expansion also resulted in a large amount of non-performing loans on commercial banks' books and posed a threat to the nation's fiscal health.

Even after the credit expansion dust settles in Taiwan, where the government has taken measures to avoid a credit bust, Lam said that Moody's expects that the delinquency ratio may remain higher than the historical level. Yields may be lower than before and the credit card market may experience slower growth, she added.
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