By Kim Jae-kyoung
Staff Reporter

The number of credit defaulters hit a new high of 3.59 million in October, up 94,271, or 2.69 percent, from September, the Korea Federation of Banks (KFB) reported on Wednesday.

The figure represents a rise of 960,445, or 36.4 percent, from the 2.63 million people blacklisted at the end of 2002.

The federation said that the increase trend has been accelerating since August. The growth rate fell to 1.98 percent in August from 3.75 percent in July, but has since increased to 2.61 percent in September and 2.69 percent last month.

``The increase was due to a surge in the number of delinquents at credit card companies caused by debtors’ moral hazards,’’ a KFB official said.

The number of credit card-related defaulters in October reached 2.28 million, up 78,996, or 3.58 percent, from a month ago, accounting for 63.5 percent of the total delinquents.

Market experts said that recent measures by card firms and banks to reduce or cease credit card services to ``risky’’ people could cause the number of people with financial servicing problems to go up in the coming months.

``A number of multiple debtors will be directly affected by the reduction in cash advance services because it will give them difficulty in paying off one credit card bill by using another card,’’ Korea Institute of Finance economist Choi Gong-pil said.

``To prevent a surge in the number of credit defaulters, card firms should not lower cash advance ceilings radically,’’ he added.

The credit card industry estimated that of the 9.9 million cardholders, around 1 million individuals have relied on the practice of borrowing money to pay back existing debts.

Credit defaulters in their 30s numbered 1.08 million in October, up 3.24 percent, or 33,974, from September, while those in their 20s increased from 690,329 in September to 709,102 in October.

The number of defaulters in their 40s and older climbed 2.38 percent to 1.8 million last month from a month ago, accounting for more than 50 percent of the total. But the number of teenage credit defaulters decreased 4.89 percent to 5,488.

The federation said the number of people with bad credit started rising from the end of 2001 and reached 2.5 million in May last year.

The figure fell to 2.25 million in July last year when the government offered a pardon to credit card defaulters, but it has since risen to reach 2.63 million at the end of last year and topped the 3-million mark in April.

Financial institutions register individuals as credit delinquents when they fail to service their debts for three months or longer.


kjk@koreatimes.co.kr