FSS issues consumer alerts based on common complaint cases

Nighttime calls, visits among prohibited collection practices

Consumers urged to check rights on statute of limitations, deferrals and debt restructuring

Loan advertisements are posted on a wall in Seoul. [Yonhap]
Loan advertisements are posted on a wall in Seoul. [Yonhap]

The Financial Supervisory Service has urged consumers to familiarize themselves with debt collection rules to avoid being disadvantaged by ignorance of their rights. The FSS warned that even old debts can have their statute of limitations reset to 10 years once confirmed by a court ruling, and that the frequency and methods of collection contact are subject to legal limits.

The FSS on Wednesday released a set of key consumer advisories on debt collection — covering the statute of limitations, contact frequency limits, contact deferrals and debt restructuring — based on actual complaints it has received.

Under the rules governing financial debt collection, collectors may not contact a debtor more than seven times over any seven-day period per debt. The limit applies to all forms of contact made for collection purposes, including phone calls, in-person visits, postal mail and email. However, certain contacts are excluded from the count: visits where the debtor was not present (up to twice in seven days), calls ended unilaterally by the debtor (up to twice a day), simple notifications such as overdue balance reminders (up to once a day), and legally or contractually required notices or unanswered calls.

Visiting a debtor's home or workplace is not in itself illegal. However, collectors are prohibited from publicly disclosing their intent to collect when a debtor is in a vulnerable situation — such as during a wedding or funeral — or from making phone calls or visits between 9 p.m. and 8 a.m. the following morning in a manner that causes fear or anxiety. Collectors are also barred from informing family members or coworkers of the debt or demanding that they repay it on the debtor's behalf.

If illegal collection practices are suspected, the FSS advises consumers to preserve objective evidence such as text messages, KakaoTalk messages, call recordings, and photos or videos. Complaints can be filed with the FSS, and in emergencies involving assault or threats, consumers should contact police.

Consumers receiving collection notices on old debts should also verify the statute of limitations. The standard limitation period for financial debts is five years, but a court ruling confirming the debt resets the clock to 10 years. The limitation period may also be suspended if a seizure, provisional seizure or provisional disposition has been carried out. The FSS said consumers should request relevant documents — including court judgments, payment orders and seizure decisions — from the creditor to confirm the applicable period.

[Newsis]
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Even when the statute of limitations on a debt has already expired, failing to respond properly to a lawsuit filed by the creditor can make it difficult to later assert that the limitation period has lapsed. Consumers who receive court documents such as a complaint must not ignore them and should submit a written response within the designated deadline.

Those temporarily unable to repay debts due to an accident or illness may apply for a deferral of collection contact. Debtors who qualify for special disaster relief, or who have experienced an accident, illness, death or marriage involving themselves or a family member, can notify the collector and pause collection contact for up to three months, once per qualifying event.

Consumers may also request that collectors refrain from contacting them during certain hours or through certain channels. Time restrictions can be set for up to 28 hours per week, and debtors can designate specific means — such as in-person visits to a particular address, phone calls, text messages or email — to be excluded from contact.

Benefits received by recipients of basic livelihood support and the right to receive them cannot be seized. Livelihood account balances of up to 2.5 million won ($1,840) per month are also exempt from seizure. If a seizure has already been carried out, consumers can apply to the court to modify the scope of the seizure exemption and request a full or partial cancellation.

Those struggling to repay debts may turn to debt restructuring programs offered by financial institutions or the Credit Counseling and Recovery Service. Personal financial debts with a principal balance of less than 30 million won per account can be submitted for restructuring directly to the relevant financial institution under certain conditions, and the institution must notify the debtor of its decision within 10 business days. Restructuring through the Credit Counseling and Recovery Service can result in extended repayment periods, reduced interest rates or partial debt forgiveness.

However, even when debt restructuring proceedings begin and collection contact is suspended, any existing seizures are not automatically lifted.

The FSS advised consumers who need small amounts of cash to first check whether they are eligible for policy-backed lending products for low-income borrowers — such as the Illegal Lending Prevention Loan or Haetsal Loan — rather than turning to illegal private lenders.

Meanwhile, harm caused by illegal private lending and aggressive debt collection has been rising sharply. According to Korean National Police Agency data, the number of illegal private lending cases detected jumped from 1,801 in 2022 to 5,519 last year — more than tripling in three years. Debt collection complaints involving threats or verbal abuse filed with the FSS also surged nearly fivefold, from 869 in 2021 to 4,280 last year.


rim@heraldcorp.com