Hi guys, most of you should have read an article about national happiness fund in our blog! Since it is such a preposterous financial policy (in a good way) the new government is pursuing, there are lots of small talks about it that it inducts moral hazards and has lots of fabrications that are irrational. I’m here today to elucidate all these misunderstanding through quoting official announcement Financial Services Commission (FSC) has made in an activity report to the president Park. Let’s take a look at it one by one.
First misunderstanding people brought up was that national happiness fund can bring up several moral hazards by people who abuse the original purpose of the policy. FSC has officially announced that the National Happiness Fund is a one-shot business that leaves no supplementary supports which means that people that overdue expecting additional liability exemption might receive disadvantages such as overdue interests. Overdue interests that National Happiness Fund focus on are liabilities that are overdue over six consecutive years since February, 2013. Meaning that overdue should have been started before August, 2012, overdue interests that are delayed intentionally since National Happiness Fund was first announced (November, 2012) will be ruled out. Also, since there might be people that delay redemption of debts expecting additional policies, FSC has made a clear statement that periods for straight underwriting of debentures will be localized within 12 months.
Second misunderstanding that was raised was that the efficacy will be insignificant as there is too little beneficiaries. But let us hear out what FSC says. People expected to recover that credits are about 3,450,000 total. Anyone that have volition of self-support will be able to receive benefits from this policy. When FSC first announce National Happiness Fund, they expected to take cost of 8000 hundred million and 326,000 people would be beneficiaries, but this assumption was based on past experiences, but in reality they expect this to be varied.
Third one is that this policy of National Happiness Fund is not much different from other programs of credit repair but this is so not true. Let’s figure out what are the changes that have been made. First, financial and loan companies that are participating have been expanded a lot. Companies participating National Happiness Fund is 4,013 compared to 221 companies of Credit Repair Fund. Second, when a debtor requests for a liability adjustments financial companies are obligated to dispose debentures which means that it’s quicker and at the same time, effective too. Lastly, range of liability exemption is greater than former ones. Percentage of liability exemption is 50% maximum and in case of basic living pensioners can receive up to 70% maximum.
Fourthly, there are questions being raised which says that it would be too burdened for beneficiaries as redemption period is too long (10 years), also that there will be a number of intermediate dropouts. But FSC says, this is not necessarily the case as redemption period is set in the light of capacity of repayment, which means that people that recover their repayment ability can make an advanced payment. Lastly, there is a point in dispute that there is a preferential controversy of banks and financial companies. National Happiness Fund will be straightforward when they select debentures to be purchased, consulting bond price, and they will be extra strict when ex-post settling up after adjusting debentures. National Happiness Fund will purchase delayed debentures of financial companies according to certain criteria such as debtor’s age, income or overdue period.
There has been lots of doubts of National Happiness Fund as it is magnified and has lots of shocking offers but I hope the official announcement of FSC solved out your questions. I hope people that are in need of repay their liabilities can make a good use of this shocking policy!
By Hyok Hee Kwon (firstname.lastname@example.org)