Abolition of Automatic Termination Rule for Dormant Card Contracts... Reuse Allowed Upon Customer Request

Reference Image

[Asia Economy Reporter Kim Hyo-jin] From now on, even if the use of a credit card is suspended due to non-use, the contract will be maintained until the expiration date so that the customer can reuse it as needed upon request.

The Financial Services Commission announced that it approved an amendment to the Specialized Credit Finance Business Supervision Regulations containing this content at the regular meeting on the 29th.

Under the current regulations, although the validity period is usually five years, if the card is not used for more than one year, it becomes a dormant card, and the card company must notify the customer of the dormant card status within one month thereafter.

If the customer does not express the intention to maintain the contract within one month after the notification, the card use is suspended, and if nine months pass from that time, the contract is automatically terminated.

As a result, there were concerns that customers would experience inconvenience in card use and reissuance, and that card companies would face increased costs for recruiting new members among those who were automatically terminated.

With the amendment to the supervision regulations, the automatic termination regulation will be abolished. However, if the validity period expires while the suspension is not lifted, renewal and replacement issuance will be restricted.

The card company will, in principle, bear responsibility for damages caused by use of the suspended card by anyone other than the cardholder. The amended regulations will take effect from the 1st of next month.

Regulations on rental business for business-to-business (B2B) by specialized credit finance companies (specialized credit finance companies) will also be relaxed. Currently, specialized credit finance companies can only conduct rental business within the scope of each lease asset for items they handle as leases.

A lease allows the use of a specific item for a certain period in exchange for payment, and at the end of the period, the user acquires the item, whereas rental is a lease of common items where the user must return the item at the end of the period.

From September 1st, specialized credit finance companies will be able to conduct B2B rentals even for items that are not under lease.

However, to prevent infringement on the small and medium rental market, the Korea Federation of Specialized Credit Finance Associations will set rental handling standards such as item types, industries, and handling scale, and an appropriateness review process must be conducted in advance.

The Financial Services Commission also allowed that if a sole proprietor who is closing a business proves the ability to repay principal and interest, the soundness of the loan claim can be classified from 'below fixed' to 'above precautionary.'

Claims are classified by soundness into normal, precautionary, fixed, doubtful recovery, and estimated loss.

Additionally, the Financial Services Commission changed the classification adjustment criteria for debt-adjusted loan claims from administrative guidance to supervision regulations and deleted the regulation that limited the method of entrusted management of specialized credit finance companies' proprietary assets to private single funds.

This content was produced with the assistance of AI translation services.