TITLE: South Korea's Financial Services Commission Strengthens Personal Overdue Debt Management Practices
BODY:
On February 26, 2026, the Financial Services Commission (FSC) of South Korea held the second Inclusive Financial Transformation Conference to reform debt collection practices and implement people-centred finance. The FSC announced comprehensive measures to strengthen personal overdue debt management, focusing on three key initiatives: activating financial companies' internal debt restructuring at early stages of delinquency, strengthening regulations on debt sales, and reforming mechanical extension practices of statute of limitations on overdue debts.
The FSC introduced institutional support to encourage financial companies to utilise internal debt restructuring procedures more actively. Financial institutions must now inform debtors of their debt restructuring rights before loss of benefit of time, and the FSC will distribute best practice guidelines for internal debt restructuring standards across financial sectors. A post-evaluation system will assess financial companies' debt restructuring performance, and principal reductions will be recognised as losses to strengthen incentives for internal restructuring.
To enhance consumer protection during debt sales, the FSC will require original creditor financial companies to maintain customer protection responsibilities even after selling debts. This includes monitoring and reporting illegal practices by debt purchasers and restricting sales of debts undergoing Credit Counselling and Recovery Commission (CCRC) restructuring. Financial institutions must specify resale restrictions and timeframes in sale contracts and report debt sale details to regulators.
Regarding statute of limitations practices, the FSC will permit tax deductions upon statute completion, initially applying to debts below 50 million won for banks and insurance companies, and 30 million won for savings banks. The FSC will amend the Civil Procedure Act with the Ministry of Justice to eliminate public notice service exceptions currently available only to financial companies, shifting practice from "principally extending, exceptionally completing" to "principally completing, exceptionally extending" statutes of limitations.
REFERENCES:
Financial Services Commission Press Release (February 25, 2026): https://www.fsc.go.kr/