New Leap Fund Acquires 2.6 Trillion Won in Overdue Receivables, Halting Debt Collection

New Leap Fund, South Korea’s state-backed “bad bank” for long‑term delinquencies, has now accumulated roughly 11.7 trillion won in overdue receivables and recently added another 2.6 trillion won to its portfolio, triggering an immediate halt to collection activity for hundreds of thousands of borrowers whose debts were transferred into the program. For Credit and Collection News readers, the fund offers a live case study in how aggressive public purchases of nonperforming debt can simultaneously reshape a nation’s collections market and reset expectations around consumer relief.fsc+5

Government “Bad Bank” Turns Off Collections

Launched in October 2025, New Leap Fund was created by Korea’s Financial Services Commission (FSC) and is operated by the Korea Asset Management Corporation (KAMCO) as a long‑term restructuring vehicle for severely overdue consumer and small‑merchant debts. The fund targets unsecured loans of up to 50 million won that have been delinquent for more than seven years, purchased from banks, card issuers, cooperatives, public institutions, and specialty finance companies that sign on to the program.fsc+2

Once a creditor sells its long‑term delinquent portfolio into New Leap Fund, debt collection efforts stop at the point of transfer, eliminating ongoing contact and enforcement against those borrowers. The program does not require consumers to apply; instead, the fund relies on financial data and government records to identify eligible accounts and then notifies borrowers once their debts have been acquired and assessed.sedaily+4

2.6 Trillion Won Purchase and 2.6 Trillion Won in Relief

Since launch, New Leap Fund has purchased approximately 11.74 trillion won in long‑overdue receivables across multiple rounds of transactions with participating institutions. Within that aggregate, recent deals have added about 2.6 trillion won in additional long‑term delinquent bonds, including a 1.1 trillion won sale by KAMCO and other follow‑on purchases intended to sweep in previously excluded accounts.sedaily+3

These acquisitions have translated into large‑scale borrower relief: as of late June, authorities reported that around 500 billion won had already been written off for roughly 69,000 individuals out of a 9.1 trillion won portfolio, with broader support expected to reach about 1.134 million people over the life of the program. Basic livelihood security recipients and other highly vulnerable borrowers can receive full, expedited extinguishment without detailed repayment‑capacity reviews, while other consumers undergo individualized assessments that may result in write‑offs or restructured terms over extended periods.fsc+2

What “Halting Debt Collection” Really Means

For industry stakeholders, the most consequential feature of New Leap Fund is that collection activity ceases by design once debt is transferred into the vehicle. Unlike traditional secondary‑market sales where receivables move from originators to private debt buyers who may intensify collection efforts to drive recoveries, the fund’s mandate is explicitly to stop collection pressure, evaluate repayment capacity, and then either forgive or restructure debt to facilitate credit rehabilitation.fsc+3

Korean regulators argue that this policy reduces “excessive collection” and helps restore normal credit activity among long‑term delinquents who have little realistic ability to repay under conventional timelines. In practice, creditors gain a capital and balance sheet benefit through disposing of deeply impaired assets, while the state assumes the social policy objective of managing borrower outcomes via centralized restructuring rules rather than allowing a purely market‑driven recovery process to run indefinitely.fsc+3

Impact on South Korea’s Collections Market

New Leap Fund’s rapid growth is unfolding against a backdrop of rising consumer stress and a maturing debt collection industry in South Korea. According to the Financial Supervisory Service, 22 domestic collection companies generated over 1.04 trillion won in operating revenue in 2025, with debt‑collection‑specific income climbing 4.5 percent year‑over‑year as overdue consumer balances expanded.allianz-trade+1

By ring‑fencing the oldest, hardest‑to‑collect receivables into a public “bad bank,” regulators are carving out a segment of the market that might otherwise cycle repeatedly through private buyers and collectors. For agencies and debt buyers, this means fewer ultra‑aged accounts in the commercial pipeline, but potentially improved clarity around the remaining inventory, which is more likely to be in earlier‑stage delinquency and subject to traditional collections and litigation strategies.allianz-trade+4

Lessons for U.S. Creditors and Collectors

While New Leap Fund is tailored to South Korea’s legal and social‑welfare framework, the initiative raises strategic questions for creditors, investors, and debt collectors in other advanced markets. It illustrates how governments can deploy a centralized purchase‑and‑relief mechanism at scale, turning off collection activity on older portfolios to pursue systemic credit‑rehabilitation objectives that might conflict with pure recovery maximization.allianz-trade+4

For U.S. readers, potential parallels include long‑standing debates around student loan forgiveness, pandemic‑era forbearance programs, and proposals for targeted relief on medical debt—areas where policymakers have weighed the benefits of mass discharge and restructuring against concerns about moral hazard and market discipline. New Leap Fund’s structure—automatic eligibility, no consumer application, purchase of receivables directly from institutional holders, and an immediate halt to collections—offers a concrete model that other regulators may study as they evaluate tools to address chronic delinquency and credit‑access gaps among vulnerable borrowers.