The court ruled "Huang"--a Taipei resident identified only by his surname for reasons of privacy--must pay US$2,680 over six years in order to settle his credit card debts. This makes him the first person in Taiwan to use a court-monitored settlement mechanism in accordance with the Consumer Debt Clearance Regulations, which took effect April 11. The regulations passed the third reading in the Legislative Yuan June 8 of last year.
"The ruling has opened a window for people who have defaulted on loans and are sincere in making efforts to settle their debts," said Kuo Chi-jen, secretary-general of the Legal Aid Foundation, Aug. 4. According to LAF statistics, 8,317 people have petitioned for debt repayment negotiation, while 488 have applied for assets restructuring until end of July.
As the nation's first personal bankruptcy legislation since the Bankruptcy Act was promulgated 73 years ago, Consumer Debt Clearance Regulations were targeted at aiding debtors with small loans, especially those with debts from credit and cash cards.
LAF attorney Hsieh Hsin-ling, who assisted with Huang's debt-restructuring petition, said the petitioner had contracted polio during childhood and lived on a government subsidy and by selling recyclables. "Huang borrowed US$6,500 from friends and used credit and cash cards in an attempt to service the debt," she said. "At one point, he owed banks more than US$20,000."
Hsieh explained a reduction in government benefits and an operation had forced Huang to seek assistance. The repayment plan, which was approved by the court Aug. 1, took the applicant's sincerity to repay the debts and rising consumer prices into account, she added.
"Whether the debts will be completely satisfied, or simply a percentage, is not the court's major concern," LAF member and lawyer Lin Yong-song said. "The debtors' sincerity in repaying their debts and developing healthy personal finance practices are more important," he added, noting that the court recognized financial institutions as having a duty of care when assessing an applicant's credit worthiness.
Six of Huang's creditors--including Taishin International Bank, Chinatrust Commercial Bank and Fubon Financial Bank--announced after a meeting at the Bankers Association of the Republic of China Aug. 5 they would appeal the ruling and sue Huang for fraud and forgery.
In response, the LAF reminded the banks that Consumer Debt Clearance Regulations were made to resolve problems for debtors that stemmed from 2005's relaxation of credit card-issuance policies. At the time, many consumers ran up large debts using credit and cash cards, quickly slipping into a vicious circle of attempting to service existing obligations with new lines of credit.
The LAF argued that responsibility for this situation should not be shouldered by the debtors alone. "During this period, many banks did not adhere to fair consumer credit policies, with sales representatives even pressuring card applicants into forging personal information," the foundation stated.
Write to June Tsai at june@mail.gio.gov.tw