Risky Business: Legal and Economic Perspectives on South Korea's Individual Debtor Rehabilitation Acts

Abstract

Two years following the 1997-98 Korean financial crisis, the Korean government attempted to bolster consumer spending and re-invigorate the national economy by pursuing a series of policies that directly promoted the use of consumer credit cards. Subsequently, consumer credit card spiked upward, which led to a dramatic surge in individual debtor defaults. The government in response mode again thereafter initiated a three-pronged legislative effort to counter the post-1997 individual debtor polemic: (i) the Individual Debtor Rehabilitation Act (“IDRA” or the “Act”); (ii)) the Korea Asset Management Company’s Bad Bank (KAMCO or “Bad Bank”); and (iii) the Credit Counseling and Recovery Service (CCRS) (collectively, the “Legal Acts”). This paper surveys and analyzes the Legal Acts approach to resolving South Korea’s post-1997 consumer credit card spending polemic.