"Preventing delinquency before it occurs"—Credit-card companies shift debt adjustment from after the fact to beforehand

[Financial News] Credit-card companies are moving the timing of debt adjustments from after delinquency to before it occurs. Rather than offering installment repayment or debt reductions only after a customer becomes delinquent, they are first informing customers who may have difficulty repaying because of temporary financial hardship about available repayment options. For customers who cannot repay their card bills all at once, adjusting the repayment period before delinquency is expected to help reduce their burden. 
According to industry sources on the 8th, card companies are expanding support for vulnerable borrowers and non-face-to-face application channels in addition to existing debt-adjustment measures such as debt-refinancing loans, installment repayment, and debt reductions. Shinhan Card is broadening the scope of its in-house debt-adjustment programs, from the pre-delinquency stage through the period after public debt adjustment.
Since April, Shinhan Card has been informing customers who may face a greater repayment burden about tailored installment-payment options, based on their card-use patterns, whether they have exhausted their credit limits, and recent financial transaction information. The program targets customers experiencing temporary financial difficulties due to sudden medical expenses, business suspension or closure, resignation, and similar circumstances.
Depending on each customer's situation, payments can be spread over 12 to as many as 60 months, with interest rates lower than those applied to existing installment transactions. The program also offers additional interest-rate reductions to customers who make payments faithfully for a certain period. About 770 people used the program during its first five months.
The company also offers in-house debt-adjustment opportunities to customers preparing for individual rehabilitation or bankruptcy, not only to those in the pre-delinquency stage. Customers who receive a debt certificate are informed that they may qualify for in-house debt adjustment, and reductions are applied depending on their circumstances. About 140 people received reductions through the program in the first half of this year.
Shinhan Card also operates a program for customers whose public debt-adjustment arrangements have been discontinued. If a debt-adjustment arrangement through the Credit Counseling and Recovery Service (CCRS) becomes ineffective because of missed payments, or if individual rehabilitation proceedings are terminated, the existing arrangement loses its effect and the repayment burden may rise again. Since February, Shinhan Card has been informing these customers about its in-house debt-adjustment program and helping them find new repayment methods through measures such as principal reductions.
However, in-house debt adjustment is not applied uniformly to all customers. Eligibility and terms vary depending on each program's target customers, usage conditions, repayment period, and reduction criteria.
A Shinhan Card official said, "Debt adjustment is not simply about reducing a customer's debt. The key is to create conditions that enable the customer to resume repayment." The official added, "Providing early support to customers facing temporary financial difficulties may also help reduce the likelihood that their situation will develop into long-term delinquency."
[email protected] Hong Ye-ji Reporter