Prepaid Installment Business Operators Including Sangjo Companies Must Maintain Capital of 1.5 Billion KRW... Registration Cancellation for Violations

Fair Trade Commission Announces Legislative Notice for Amendment to the Installment Transactions Act

[Sejong=Asia Economy Reporter Joo Sang-don] The Fair Trade Commission is pushing for a plan that requires prepaid installment sales businesses, such as funeral service companies, to maintain a capital of 1.5 billion KRW even after registration to strengthen consumer protection in the installment transaction sector.

The Fair Trade Commission announced on the 12th that it will prepare a "Revision of the Installment Transactions Act" containing this content and will announce it for legislative notice until the 23rd of next month.

Under the current law, only those who intend to register as prepaid installment sales businesses are required to meet the capital requirement of 1.5 billion KRW. Because of this, if a prepaid installment sales business reduces its capital due to poor performance or other reasons, there is a possibility that the capital falls below the registration standard. Therefore, prepaid installment sales businesses will be required to maintain a capital of 1.5 billion KRW even after registration, and if violated, the competent local government may cancel the registration.

The processing deadlines for various reports submitted by prepaid installment sales businesses to local governments were also specified. Under the current law, prepaid installment sales businesses must report changes in registration details, succession of status, and contract transfers to the competent local government. However, there was no regulation on the processing deadline for these reports. To ensure transparent and prompt handling of complaints and to enhance predictability for complainants, processing deadlines were specified as 7 days for changes in registration details and succession of status, and 5 days for contract transfers. However, in the case of reports on changes in registration details and succession of status, the processing deadline may be extended within the 7-day period, but the reason for the extension must be notified to the reporter. In the case of contract transfer reports, if the acceptance or rejection is not notified within the processing deadline, the report will be deemed accepted on the day following the deadline.

An obligation to notify consumers about advance payments was newly established. Under the current law, prepaid installment sales businesses are not separately required to notify consumers about advance payment details, making it difficult for consumers to know whether advance payments are properly secured. Therefore, prepaid installment sales businesses must notify consumers of advance payment-related details after confirmation from the payment obligors such as banks and mutual aid associations, and submit the notification details to the Fair Trade Commission. If violated, the Fair Trade Commission may impose corrective orders and fines.

A Fair Trade Commission official said, "Through this revision of the law, we expect the overall financial soundness and compliance awareness of the funeral service industry to improve, and violations related to advance payments to decrease. Additionally, by presenting clear operational standards for administrative procedures such as processing deadlines for reports and fines, we will enhance the predictability for funeral service companies as regulated entities."

The Fair Trade Commission plans to collect opinions from stakeholders and related organizations during the legislative notice period, then proceed through regulatory review, legal review, and legislative procedures such as vice ministerial and cabinet meetings, and submit the revision of the Installment Transactions Act to the National Assembly within this year.

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