As the Financial Supervisory Commission's negligence and waffling has contributed to the problem of snowballing consumer debt, the authority must formulate a clear policy in order to contain the spiraling problem before it harms the nation's credit system, experts say.
"The financial authority must make the rules of the game and its bottom line clear and firm in order to discourage indebted borrowers from expecting that more preferential terms will be available in the future," said Charles Yeh (
Resolution
Only a timely and sturdy resolution will help rein in the problem, which could ultimately damage the credit system and in turn increase risk in the finance industry, Yeh said.
The commission estimates that there are about 500,000 credit and cash card abusers, with each bearing more than NT$500,000 (US$15,400) of debt, translating into NT$260 billion of bad loans in the sector.
About 21,000 debtors have resorted to using the commission's debt negotiation mechanism and of those, about 1,000 have signed repayment contracts with their banks. The remaining debtors, however, seem to be taking a wait-and-see attitude.
The commission launched a campaign last week urging indebted cardholders to enter the bail-out program by April 10, or face debt collection pressure from their banks. Even so, there are concerns that some of the financial watchdog's recent decisions may further stir debtors' hopes that it will offer more leeway in meeting payment obligations in the future.
The negotiation system was originally restricted to bad debt accumulated before Dec. 15 last year, but it has since been expanded to include debt incurred after that date.
In addition, those not in arrears but who are finding it difficult to repay can also use the program to negotiate tailored repayment schemes with reduced or even zero interest rates, or longer payback terms of up to 10 years, according to the commission.
Debtors who fail to sign a new repayment agreement within 14 days after beginning negotiations can start talks again, the commission said.
This, however, is inconsistent with the regulator's previous announcements.
Yang Ya-hwei (
"Also, we do not agree with loose legislation or amendments to the bankruptcy law," because although swiftly passed laws may provide an easy solution in the short term, they often have long-term side effects, Yang said.
As many card abusers appear to expect that planned legislation on personal debt will help exempt them from paying back part of their loans, banking analysts are worried that this could prolong the bad-loan problem.
Potentially, the delinquent amount could jump by 50 percent to NT$300 billion or even NT$360 billion from former estimates of NT$200 billion to NT$240 billion, Sophia Cheng (
Bankruptcy law
The drafting of a personal bankruptcy law will drag out the process of clearing problem debts from the system; the consensus view that provisions will peak in the second quarter is now in question, Credit Suisse (Hong Kong) Ltd's analyst Sherry Lin (
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