Five major global credit-card issuing organizations yesterday voiced their concern that a lack of thorough personal bankruptcy legislation to sort out the bad debt problem is likely to result in fraud and abuse that will ultimately harm the nation's credit system.
Taiwan must take all important factors into account when instituting a personal insolvency regime, based on international experience, according to a statement released yesterday by American Express, Diners Club, JCB, MasterCard International and Visa International.
SAFEGUARDS
These elements include multiple safeguards against potential abuse, multiple safety nets to ensure effectiveness, independent credit counseling and individual voluntary arrangements that can ensure that bankruptcy is only used in the most extreme cases and as a last resort, the companies suggested.
Otherwise, the moral hazard risk will be a real issue under the insolvency regime and the costs of fraud and abuse in the bankruptcy system will impact everyone because all consumers will be forced to pay a higher price for credit and services, the companies warned.
This could lead to a credit crunch that would push unsecured lending underground, slow consumption, dampen economic growth and discourage foreign investment, they said.
Officials from the five organizations met with Financial Supervisory Commission (FSC) last Friday, expressing their concern and providing anecdotes and precedents from the US, Hong Kong and Australia.
CREDIT COUNSELING
The FSC said it had found that independent credit counseling could effectively reduce the number of bankruptcy applications and therefore it was a mechanism worth considering.
"We will combine useful suggestions from the industry and our own professional opinions and submit them to the Judicial Yuan, which is responsible for the consumer debt clean-up legislation ? sometime next week," said Amy Chin (
RSS