Korean Regulator Introduced National Happiness Fund

In gloomy international financial market, The Financial Services Commission (FSC), South korea has given a reason to cheer to common investor through unveiling details about the National Happiness Fund, which has been officially launched on March 29, 2013. The Fund aims to help credit recovery of delinquent borrowers and heavily-indebted low-income earners with programs including restructuring debt, easing debt servicing burden on student loans, and converting high-interest loans to lower-interest ones.

Those programs will need a total of KRW 1.5 trillion over the next 5 years. The Fund will initially raise KRW 800 billion through the KAMCO-controlled fund, loans and bond issuance. The remaining KRW 700 billion will be funded by the Fund’s proceeds and guarantee fees. Financial institutions and non-bank lenders which sign an agreement for credit recovery assistance will be obliged to sell overdue loans to the Happiness Fund if their borrowers apply for debt restructuring.

PROGRAMS TO BE FUNDED BY THE NATIONAL HAPPINESS FUND

1. Credit Recovery Assistance Program

Debt restructuring for overdue loans will be operated with two tracks:

(1) Debt restructuring by borrowers’ prior application
 

The fund will purchase overdue loans by prior application of debtors who borrowed from the enlisted financial institutions.

(2) Debt restructuring by borrowers’ later consent

For overdue loans without borrowers’ application for debt restructuring, the fund can first purchase the loans from the enlisted financial institutions and then conduct debt restructuring by obtaining borrowers’ later consent.

2. Debt Restructuring for Student Loans

eligible applicants - Individuals who give later consent to debt restructuring for overdue loans that the Fund purchased from the Korea Student Aid Foundation (KOSAF)

- Individuals with student loans overdue for 6 months or longer as of end-February 2013 from the enlisted financial institutions benefits -Debt can be written-off or rescheduled depending on applicants’ ability to repay.

-Debt repayment can be deferred until the applicant finds a job. Nullification of benefits If the applicant did not faithfully fulfill their debt restructuring obligation, or hidden assets were detected, all the benefits would be nullified.

how to apply After July 2013, the Fund or the KOSAF individually contact eligible beneficiaries to
confirm their consent to debt restructuring.

3. Conversion of Outstanding Loans into Lower-interest Loans

eligible applicants - Individuals who borrowed loans at 20% or higher from financial institutions or registered non-bank lenders; diligently repay their debt for the last 6 months or longer as of end-February 2013; and earn less than 40 million won a year 

benefits -Outstanding loans with 20% interest rate or higher can be converted to loans with lower-interest rates above 10%. For each borrower, up to 40 million of outstanding loans can be converted.