The South Korean Financial Services Commission has announced a significant legislative change aimed at protecting vulnerable individuals from financial distress. Starting May 1, 2025, the revised 'Enforcement Decree of the Act on Support for the Financial Lives of the Vulnerable' will expand the scope of mandatory debt restructuring agreements to include mobile phone service providers and small-sum settlement businesses, commonly referred to as Altttephone companies.
This amendment is a response to previous gaps in debt restructuring provisions that left some individuals without support. The Credit Counseling and Recovery Commission (CCRC) had previously established a business agreement with the telecommunications sector in June 2024, focusing on the comprehensive adjustment of financial and telecommunications debts for vulnerable debtors. However, it was noted that only a small fraction of the Altttephone companies and small-sum settlement businesses, which account for about 2% of the market share, were participating in this agreement.
According to the Financial Services Commission, the legislative notice for the revised decree will be open until June 10, 2025. The amendment process is expected to be finalized by the enforcement date of September 19, 2025.
The recent changes come in the wake of a broader amendment to the People's Livelihood Finance Act in March 2025, which legally mandated the inclusion of telecommunications businesses in debt restructuring agreements. This move is anticipated to close the gaps that previously existed in the debt restructuring landscape, thereby providing necessary support to those in financial need.
"The legal establishment of the financial and telecommunications debt restructuring system will enhance the enforcement power of the agreement, allowing us to address the backlog of debt restructuring cases effectively," stated a representative from the Financial Services Commission. The expectation is that this will resolve the issues faced by some telecommunications businesses that had not previously joined the CCRC's business agreement.
In addition to these provisions, the amendment allows for the transfer of operating profits from the management account for dormant deposits within the Korea Inclusive Finance Agency to the People's Livelihood Finance Security Account. This change aims to enhance the funding available for supporting vulnerable individuals in managing their debts.
Furthermore, the establishment of the Saemaul Geumgo Asset Management Company, which will oversee the management of non-performing claims related to Saemaul Geumgo and its Central Association, is also included in the institutions subject to the CCRC agreement. This addition reflects a comprehensive approach to managing financial distress across various sectors.
These legislative changes are part of a broader strategy to ensure that individuals facing financial hardships have access to necessary resources and support systems. The Financial Services Commission's commitment to enhancing the legal framework for debt restructuring is expected to provide significant relief to many vulnerable debtors who have struggled to navigate their financial obligations.
As the legislative notice period progresses, stakeholders in the financial and telecommunications sectors will be closely monitoring the developments. The expected outcome of these amendments is a more inclusive and responsive financial system that prioritizes the needs of those who are most in need of assistance.
In conclusion, the upcoming changes to the People's Livelihood Finance Act represent a critical step forward in addressing the financial challenges faced by vulnerable groups in South Korea. By expanding the scope of debt restructuring agreements to include additional service providers, the government is taking proactive measures to ensure that no one is left to navigate their financial struggles alone.
