President Criticizes Card Company That Received Tax Support for Aggressive Debt Collection; Lee Eok-won Says He Will Persuade Shareholders

[The Financial News] President Lee Jae-myung criticized Sangnoksu, a private bad bank established during the 2002-2003 credit card crisis, asking whether it was right to "aggressively collect debts that are more than 20 years old." Financial Services Commission Chairperson Lee Eok-won replied that it was "passive because profit is behind it."
The president said some card companies that overcame a liquidity crisis during the credit card crisis with government support were profiting from continued delinquent debt collection, calling it "predatory and primitive finance." He also instructed officials to resolve the issue through legislation if necessary.
At the State Council meeting on the 12th, Lee referred to recent media reports and said, "There seems to be a private bad bank called Sangnoksu. It is a place that collects delinquent loans to clean up bad debts created during the credit card crisis, but it seems to still be actively collecting them." He added, "Didn't card companies receive help from government tax money during the card crisis?" and noted that they "still aggressively collect delinquent debts, while also posting annual operating profits of tens of trillions of won and receiving dividends."
Lee strongly criticized the accumulation of interest on long-term delinquent debts. He said, "For the delinquent borrowers who caused this, the interest has grown so much that a few million won became hundreds of millions of won," and asked, "From the public's perspective, is it right to demand repayment until death even if the amount grows tenfold or twentyfold?"
FSC Chairperson Lee explained, "We are operating the Saedoak Fund to resolve long-term delinquent debts held by financial institutions, and we continue to purchase debts." He added, "99.4% of financial institutions have voluntarily joined the Saedoak Fund agreement, and debt purchases and collection suspensions are under way."
Lee then said, "On the surface, it is a corporation formed by multiple institutions, so it is difficult because the consent of all shareholders is required." He added, however, that it was "passive because profit is behind it."
The president said, "We cannot force it. It is private property, but there are still limits," and criticized those who "talk about ethical management and moral management while enjoying the benefits and refusing to bear the burden." He added, "Financial institutions are not loan sharks; they operate with the government's power to issue currency," and said there is also an aspect of operating through licenses and approvals.
Lee instructed the FSC chairperson to "find a solution through legislation if necessary."
Lee Eok-won replied, "(Sangnoksu) is not an individual financial company, but a structure created by investing in an asset securitization company." He added, "The financial authorities have sent requests for cooperation and official letters, and some media outlets even described it as a threat." He went on to say, "I will meet the shareholders separately and seek their consent," adding that "some institutions, including Shinhan Card, said they would sell first. I think they will agree if I meet them individually."
On the morning of the meeting, Hana Bank also decided, following Shinhan Card, to sell long-term delinquent debts held by Sangnoksu to the Saedoak Fund.
Woori Card also said, "We joined the Saedoak Fund in October last year and are cooperating with its operation by selling eligible debts and paying contributions. We agree with the policy goal of helping long-term delinquent borrowers restart their lives and supporting financially vulnerable groups." It added, "As this concerns a decision on the disposal of assets held by Sangnoksu Asset Securitization Company, additional confirmation of the size of the assets involved is needed first. We have requested related review materials, and once sufficient information is secured for future decision-making, we plan to proceed according to the proper procedures."
When delinquent debts are sold to the bad bank Saedoak Fund, collection from borrowers stops immediately. Debt restructuring or installment repayment is then pursued based on repayment capacity. Sangnoksu is a private bad debt management company created by the financial sector in October 2003 to clean up bad loans after the credit card crisis led to a surge in credit delinquencies. Shinhan Card holds a 30% stake, while Hana Bank, IBK, and Woori Card each hold 10%.

mj@fnnews.com Park Moon-soo Reporter