The Credit Counseling and Recovery Service held a policy debate Tuesday and unveiled a plan to enact a National Basic Finance Guarantee Act to ensure "basic financial rights." The proposal calls for introducing a "four pillars of basic finance" system that would include even vulnerable groups such as low-credit and low-income individuals. The four pillars of basic finance are basic counseling and debt restructuring to ease excessive debt; basic insurance that supports medical expenses through a dedicated public indemnity insurance agency; basic loans at low long-term interest rates; and basic savings through a one-to-one matching method. The policy appears to be an expansion and development of President Lee Jae-myung's campaign pledge to provide 10 million won basic loans to low-credit borrowers.
The policy's intent of protecting vulnerable groups is understandable. However, a cautious approach is needed, as the related funding is likely to be sourced from financial institutions' profits and taxpayers' money, and it could shake credit discipline. The Credit Counseling and Recovery Service argued that all citizens having access to financial services without discrimination is a right inherent in the constitutional right to pursue happiness and the right to a life worthy of human dignity. Since basic financial rights are not specified in our Constitution, this could be seen as an arbitrary expansion of constitutional interpretation. It is also contradictory that the service defines basic financial rights as a universal right while limiting the eligibility for support to "those meeting income and asset criteria."
In a situation where multifaceted financial support systems for vulnerable groups are already in operation, whether enacting a separate law and establishing a dedicated agency is necessary is also a matter to examine. Debt restructuring and long-term low-interest loan services for low-credit borrowers are handled by the Credit Counseling and Recovery Service and others. Basic medical guarantees for basic livelihood recipients and systems to ease out-of-pocket costs for the near-poor are also in place. Non-covered medical expenses can be relieved through emergency welfare support services and catastrophic medical expense support programs. It could be far more efficient to organize these systems more thoroughly and strengthen their interconnection.
Nevertheless, if the government is to codify basic finance, it must design it precisely to avoid overlap and conflict with existing programs and to ensure there is no damage to credit order, the cornerstone of the financial system. In particular, it is important to block malicious defaulters who have survived through repeated credit amnesties, debt forgiveness, and loan policies for ordinary people, so that moral hazard does not occur. This is possible only with a strict and professional screening system and a thorough follow-up management system. It goes without saying that meticulous feasibility analysis to prevent the waste of taxpayers' money and project failure is a prerequisite.
