Obligation to Secure Advance Payments by Mutual Aid Companies... Constitutional Court Rules "Constitutional"

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[Asia Economy Reporter Baek Kyunghwan] The Constitutional Court has ruled that the legal provision on the obligation to preserve advance payments by funeral service companies is constitutional.

On the 3rd, the Constitutional Court announced that it made a unanimous decision that the Act on Installment Transactions, which stipulates the obligation for funeral service companies to deposit advance payments, does not violate the freedom to pursue a profession in the constitutional complaint filed by Mr. A.

Mr. A operated a funeral service company registered for prepaid installment transactions from March 2014 to December 2017, entering into advance payment deposit contracts with amounts less than the 2.5 billion KRW required to be preserved. Article 27, Paragraph 2 of the Act on Installment Transactions requires funeral service companies to deposit a certain percentage of advance payments received from customers into banks or mutual aid associations as specified by enforcement ordinances.

Accordingly, the Fair Trade Commission issued a corrective order to Mr. A’s company, but the company filed a lawsuit against the Fair Trade Commission seeking cancellation of the corrective order and requested a constitutional review of the law.

However, the Constitutional Court held that the provision on the obligation to preserve advance payments is necessary to compensate consumers in cases where they cannot receive the scheduled services due to the bankruptcy of funeral service companies.

The Court also judged that the provision is not excessive because the Fair Trade Commission can take corrective actions against funeral service companies that fail to comply with the preservation obligation, with flexible levels of measures depending on the degree of violation, and because funeral service companies can file objections with the Fair Trade Commission.

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