Card debt ripples through economy

This article was written by Susan Yu and published by the Taiwan Journal on April 14, 2006. It reports that the rate of delayed payment on credit card and cash card loans in Taiwan dropped from 31.4 percent in February to 9.4 percent in March 2006. The drop indicates that the nation's card debt problem may be easing. It is expected that the level of delinquent card loans will further decrease after July 2006.

Official statics show that as of the end of February 2006, some 520,000 credit and cash cardholders were delinquent in making payments on their card loans. The average debt per person stood at US$9,260. Up to 80,000 of these credit abusers are expected to eventually sign up for debt settlement.

April 10 was the last day for credit and cash cardholders to apply for a chance to enter into debt-settlement negotiations with banks on unsecured card loans. Those who applied before the end of this day were entitled to a referential repayment scheme that features no interest and no penalty on their overdue loans over the duration of negotiations, lower interest rates for repaying loans, and extensions of payment deadlines.

Statistics show that as of the April 10 deadline, some 53,000 people have completed debt-settlement negotiations with banks. This accounts for approximately 65 percent of all possible applicants. Card debt for which negotiations have been completed amounts to about US$2.7 billion.

According to the government's Financial Supervisory Commission, the debt-settlement program will continue beyond April 10, but those who apply after the date will not be entitled to the aforementioned favorable repayment conditions.

The Financial Supervisory Commission also predicts that the card debt problem will have a limited impact on Taiwan's economy. Although banks have begun to tighten consumer loan requirements, private consumption should be able to grow back at a 3-percent rate in 2006 as a result of improving employment conditions and personal income and continuous expansion of real estate and capital markets.