Presidential office weighs erasing small business owners' late payment records

A vendor in a traditional market in Seoul watches President Yoon Suk Yeol's televised address to the nation on Jan. 1. (Yonhap)

South Korea is considering removing late payments from the credit history of individuals or vendors who fell victim to the COVID-19 pandemic's economic fallout, possibly before the Lunar New Year's holiday in mid-February.

President Yoon Suk Yeol's office "is in talks with the financial authorities to map out the timing of (the removal of delinquency on the credit reports) and the scope of its beneficiaries," said a source from the presidential office on Monday.

In Korea, individuals falling five days or more behind on debt repayments face a loan delinquency record lasting up to five years, making it difficult to obtain new loans or credit cards.

Yoon's push is meant to stop these records incurred during the tough times of the pandemic affecting their daily lives, according to Yoon's office.

The plan was first unveiled Wednesday. During a public debate to shape policy directions, presided over by Yoon, the government proposed plans to wipe off loan delinquency records from an individual's credit report and extend the deadline for corporate tax payments to support the distressed individuals, according to Park Chun-sup, senior presidential secretary for economic affairs.

Seoul has carried out similar actions in 1997 and 2021. In the latest one, the government offered nearly 2.3 million individuals the chance to improve their credit scores to address their financial strain due to the pandemic, with some gaining access to loans and credit cards.

The beneficiaries were then limited to those delinquent on loans that were no larger than 20 million won, from January 2020 to August 2021, and had them repaid before the end of 2021.

When asked about the difference between the upcoming measure and the one in 2021, the source from Yoon's office declined to disclose details of the plans, saying the talks with the financial authorities have yet to be complete.

According to the presidential office, these measures are separate from the presidential pardons often implemented during national holidays. Yoon's office has not revealed plans for the presidential pardon to mark the upcoming Lunar New Year holiday. Yoon has pardoned over 5,200 prisoners on three occasions since his inauguration in May 2022.