Financial Supervisory Service to Promote Improvement of Unfair Loss of Benefit Clauses in Auto Loans and Others

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[Asia Economy Reporter Oh Hyung-gil] The Financial Supervisory Service announced on the 3rd that it will improve the 'unreasonable immediate loss of benefit of term clause' among the terms and conditions of credit finance transactions such as installment finance and leasing by credit specialized financial companies in cooperation with the Credit Finance Association.

Currently, the standard basic credit transaction terms and conditions stipulate that if a customer arbitrarily transfers collateral and causes damage to a financial company, the financial company must set a period of at least 10 days for demand, and the benefit of term is lost only after the period has elapsed from the date of receipt of the notice.

However, two standard terms and conditions used by credit finance companies, including the 'Standard Terms and Conditions for Automobile Installment Finance,' and 62 individual terms and conditions of 31 credit finance companies have special provisions that immediately cause the loss of benefit of term without giving the customer an opportunity to object or restore the original state when the customer arbitrarily disposes of collateral (transfer, lease, deregistration).

The Financial Supervisory Service pointed out, "It is desirable from the perspective of consumer protection not to reduce the level of customer rights stipulated in the basic terms and conditions," adding, "The clause that immediately causes the loss of benefit of term upon arbitrary disposal of collateral results in reducing the customer's rights stipulated in the standard basic credit transaction terms and conditions, which are the basic terms, through special agreements."

Accordingly, in the second half of this year, through consultations with the credit finance industry, plans are underway to revise installment and leasing finance terms and conditions such as auto loan (installment) terms, construction machinery installment terms, general installment finance terms, and equipment leasing terms used by individual credit finance companies.

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