The disputed personal bankruptcy bill (破產法) promoted by populist legislators could cause the re-emergence of credit abuse, spill over into the mortgage sector, harm the economy and hurt consumers who have made payments on time, a US business association warned.
Though the mounting bad consumer loans of the last two years dampened consumer spending on everything from automobiles to dining out, a full-scale crisis was eventually avoided through the adoption of a reasonable debt-restructuring scheme, the American Chamber of Commerce in Taipei (AmCham) said in the editorial of this month's Topics magazine.
The article, entitled "Playing with Fire, Again," said: "But now here we are again, facing an equally hazardous state of affairs -- this time triggered by lawmakers' reckless revisions to a bill to extend bankruptcy protection to individuals."
Early last month, the Legislative Yuan unexpectedly passed the first reading of the bill, which was criticized for its overly loose design and sparked concern that it might cause more credit abuse.
The bill allows consumers incapable of paying back debts exceeding NT$12 million (US$360,620) to apply for rehabilitation. Debtors in rehabilitation are only required to pay interest on mortgage for up to 10 years without bearing the risk of having their residence put up for auction by creditor banks.
Worried about the bill's risks, the Bankers Association of the ROC (
The bankers association also suggested implementing means tests -- investigations into the financial well-being of a person applying for financial assistance -- and credit consultations, as well as excluding participants in the debt-restructuring program from future bankruptcy applications.
Passage of the bill could bring bad debts losses that are now estimated at
NT$165 billion to NT$231 billion, the association estimated.
The bill is ready for a second reading and is under party negotiations.
However, it is not known whether lawmakers will start the second reading of
the bill in this legislative session, which is scheduled to end at the end
of this month, as the Cabinet reportedly said it didn't want to see the bill
sent to the floor for a second reading this session.
Before going on to the second and third readings, legislators need to think
carefully about what is truly in their constituents' best interest, AmCham
said.
“Rich banks” might make easy targets, but the real sufferers from the bill
would be the nation's consumers and businesses, it said.
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