The Bank of Thailand (BoT) has added consumer loan solutions to cover debtors involved with the legal system through an online debt mediation scheme.
The new debt aid scheme is designed for credit card and personal loan products, covering all different statuses of repayment including performing loans and non-performing loans (NPLs).
The scheme aims to shield borrowers from their loan repayment liabilities turning into NPLs, as some borrowers are short on cash.
The scheme also helps borrowers in the NPL category who are on the verge of, or have already entered the litigation process.
In addition to the debt mediation scheme, the central bank has two other channels, Debt Express Solution and Debt Clinic, to assist borrowers with solving problems associated with loan repayment and NPLs. However, these channels do not cover borrowers undergoing a legal remedy.
The debt mediation scheme is a collaboration between the central bank, the Court of Justice, the Legal Execution Department (LED) and 21 financial institutions, which will hold an online mediation expo during Feb 14 to April 14, said Thanyanit Niyomkarn, assistant governor for supervision group 2.
Under the scheme, borrowers can pay only the principal amount via three options of debt instalment periods, spanning three months, three years and five years.
In the event borrowers complete one of the selected options, they are not required to pay the remaining interest liabilities.
Apart from helping borrowers with debt solutions, this scheme helps to reduce the number of lawsuits under debt mediation, she said.
In 2019, there were 1.9 million lawsuits regarding debt, of which 830,000 were related to consumer loan cases.
Personal loan cases made up the largest number, with 293,899, followed by credit card cases (168,347), borrowing-related cases (138,419), student loan fund cases (92,472), and auto hire-purchase loan cases (86,406).
Mrs Thanyanit said the central bank expects the number of consumer loan lawsuits to drop by 25% or around 300,000 cases this year, mainly attributed to the debt mediation expo.
NPL borrowers who have not entered the legal process can apply for the debt mediation scheme and subsequently enter the Debt Clinic programme.
They can also enter the negotiation process under a memorandum of understanding between the Bank of Thailand and the LED.
Borrowers with performing loans who are experiencing a liquidity problem can undertake debt restructuring under the debt mediation scheme.
With the assistance of the instruments available, borrowers receive help in terms of maintaining good credit records with the National Credit Bureau, said Mrs Thanyanit.
Under the central bank's existing debt restructuring measures for credit cards and personal loans, the regulator allows borrowers to convert unsecured loan products to term loan products to reduce interest rate liability.
Both credit cardholders and personal loan borrowers can extend the loan instalment period to a maximum of 48 months, while the ceiling interest rates are capped at 12% and 22% per year for credit card and personal loans, respectively.
Separately, LED director-general Aranya Thongnamtako said if borrowers and creditors can reconcile on debt repayment, the process of litigation could be halted under the debt mediation scheme, even if the process is ongoing or a judgment has already been made.
Credit cardholders and personal loan borrowers who want to apply for the online debt mediation scheme can register on the websites of both the central bank and the LED from Feb 14 to April 14.
Applicants will receive an SMS after registering, then financial institutions call registrants within one week.