The nation's credit-card abusers may soon experience some relief, as a nonprofit company will this week start taking over and managing defaulted loans until insolvent or low-income debtors have amassed enough resources to pay back their obligations.
Creditor banks will Friday form and start operating a joint asset-management company to manage credit and cash-card debts, Financial Supervisory Commission chairman Kong Jaw-sheng (龔照勝) said in a question-and-answer session at the legislature's Finance Committee yesterday.
Shareholders of the nonprofit company would include creditor banks like Chinatrust Commercial Bank (中國信託商銀) and Taishin International Bank (台新銀行), the nation's top two credit-card issuers, the commission said.
The financial regulator did not specify who will take the helm of the new firm.
The firm will be restricted to loans that had been overdue for more than six months prior to Dec. 15 last year, in order to prevent a moral hazard, Kong said.
The company will first tackle the defaulted loans of low-income and unemployed cardholders, which are estimated at NT$10 billion (US$308.44 million), he said.
Borrowers whose card debts are managed by the company will not be subject to debt-collection activities and will not have to repay their credit-card debts until after they have found employment or their solvency improves to an adequate level, the official added.
An estimated NT$130 billion in bad debts will eventually be put under the nonprofit company's management, he said.
The number of card abusers in the country was estimated at about 500,000 with an average debt of NT$330,000 each as of January, according to figures the commission released last week.
Alarms bells started ringing around the middle of last year about the growing number of defaulted credit and cash-card debts, which resulted from local banks' aggressive promotion of the high-yield, high-risk business of unsecured consumer loans.
As the media coverage of suicides by indebted card abusers intensified, the government in January launched a card-debt negotiation mechanism providing for reduced interest rates or longer repayment terms in a bid to bail out the debt-ridden cardholders.
The nonprofit asset management company was designed to complement the debt-negotiation scheme in an attempt to accommodate insolvent debtors and prevent them from resorting to the proposed new bankruptcy law, which could prolong and aggravate the spiraling issue of bad consumer debts.
The negotiation mechanism has helped 19,000 people to settle NT$31.9 billion worth of bad debts to date, said Gary Tseng (曾國烈), director-general of the commission's Banking Bureau.
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