Debtors facing increased problems

Starting this month, consumers who are deep in debt incurred from credit or cash-advance cards will need to contact their own banks to negotiate payback plans, after the one-stop bail-out program expired at the end of last year.

The Bankers Association of the ROC (銀行公會) has also established a standing committee, which started functioning yesterday and is composed of member banks, to offer consulting services for customers.

The committee, however, would not interfere in cardholders' negotiation talks with the banks, nor would it demand that card issuers grant lower interest rates to indebted customers.

Under the old "card-debt negotiation program," which served as a common platform between cardholders and banks, consumers in debt could simply file documents with their biggest creditor bank to apply for the best debt-relief measures.

The measures -- including longer repayment periods and preferential interest rates -- offered those seriously in the red zero-interest-charge repayment for up to 80 installments.

Assistance

Statistics provided by the Bankers Association a week ago showed that 222,600 indebted cardholders successfully sought assistance from the old card-debt negotiation program.

The amount of debt involved totaled NT$327.2 billion (US$10 billion).

The repayment rate reached 90 percent, meaning that a majority of consumers tried hard to keep up with the payback schedule and maintain their credit record.

The association reminded cardholders that they should not forget the payments even out of negligence as the bad record will be disclosed in the semi-official Joint Credit Information Center (聯合徵信中心) for five years, which would affect their application for auto or housing mortgages in the future.

Now that the old negotiation program has ceased operating, consumers seeking to deal with their card debts can no longer enjoy the speedy and convenient assistance.

If consumers incur card debts from five banks, they will have to contact each of them instead of the biggest creditor bank to individually discuss the repayment plans.

Initially, the Bankers Association's standing committee will have experienced personnel from 10 major banks offering consulting services by phone.

Taiwan has experienced an unprecedented consumer credit risk over the past two years. Banks focusing on consumer financing business have borne the brunt, forced to earmark extra reserves to cover the potential bad debts.

In the red

Cathay United Bank (國泰世華銀行) dipped into the red last year after its board decided to book extra reserves totaling NT$7.3 billion late last month.

Taishin Financial Holding Co (台新金控), which owns the nation's second-largest credit card issuer, Taishin International Bank (台新銀行), is expected to post deficits for last year for the second straight year.

The latest figures show that credit cards' revolving credit balance as of the end of November totaled NT$358.61 billion with 38.64 million cards in circulation nationwide.

This was down from NT$493.4 billion in credit card lending in January last year when 45.11 million cards were active, the Financial Supervisory Commission said.