Regulations Governing Institutions Engaging In Credit Card Business Article 32

Card issuers shall set aside bad debt reserve for overdue accounts and carry out write-off of bad debt according to the following provisions:1. Setting aside bad debt reserve: If the monthly minimum payment is delayed for one (1) to three (3) months from the specified deadline, the bad debt reserve to be set aside shall be 2% of total advances made thereto; for a delay of three (3) to six (6) months, the bad debt reserve shall be 50% of the total advances made thereto; and for a delay of more than six (6) months, the bad debt reserve shall be 100% of the total advances made thereto.2. Write-off of bad debt: If the monthly minimum payment is delayed by more than six (6) months from the specified payment deadline, all advances made thereto shall be written off within three (3) months thereafter.3. The writing off of overdue accounts shall be handled in compliance with the limits authorized by the board of directors and approved by an authorized person(s), and a report thereof shall be submitted to the board of directors for reference; provided, that a foreign credit card company may handle such write offs according to the procedures authorized by its head office.Where the overdue account ratio of its credit card business exceeds the limit set forth by the Competent Authority, a card issuer shall make adjustment according to the provisions stipulated by the Competent Authority. In addition, the Competent Authority may, in view of the situation, adopt supervisory measures pursuant to the Banking Act.