"Investing with Credit Card Installments?"... Difficult to Get Relief Even If Scammed

Consumer Right 'Installment Defense' Also Requires Conditions
Only Applicable for Amounts Over 200,000 KRW and Periods Over 30,000 KRW
Difficult to Exercise Even if Fraudulent When for Commercial Purposes

[Image source=Yonhap News]

[Asia Economy Reporter Song Seung-seop] Mr. A recently paid 180,000 won for a Pilates academy near his company in three monthly installments. However, two weeks later, the Pilates academy closed down and all contact was lost. Mr. A claimed the right of defense against the remaining installment payments with the credit card company, but it was not accepted.

Mr. B promised to receive an online shopping mall lease right and fixed monthly investment returns by investing in an online wholesale shopping mall. The investment was made by paying in installments using a credit card. Although he paid a total of 2,080,000 won over 12 months, he did not receive the principal or dividends for several months. Mr. B claimed the right of defense against the remaining installment payments but was notified that exercising this right might be restricted.

Recently, cases where consumers fail to receive compensation due to not meeting conditions when exercising the right of defense for credit card installments have been increasing. The Financial Supervisory Service advised that, as overseas credit card usage is expected to surge following the easing of COVID-19 quarantine measures, financial consumers should exercise special caution.

According to the Financial Supervisory Service on the 30th, among 1,780 non-bank dispute complaints received over the past two years, 797 cases (44.8%) were related to credit card companies. This was followed by capital companies with 299 cases (16.8%), savings banks with 147 cases (8.3%), loan businesses with 138 cases (7.8%), and others including credit unions and electronic financial operators with 399 cases (22.4%). In particular, many complaints claiming the right of defense for installments have been reported.

Example and Explanation of the Right to Installment Defense. Photo by Financial Supervisory Service

The right of defense for installments is a consumer's right to refuse payment of the remaining installments if the installment transaction provider fails to provide goods or services. In indirect installment transactions involving credit card companies, consumers can refuse to pay the remaining installments after notifying the credit card company in writing or other forms of their intention to exercise the right of defense.

The right of defense can only be exercised for transactions where the amount is 200,000 won or more and the installment period is three months or longer. Transactions for commercial purposes and those where installments have already been fully paid are excluded. Although fraudulent schemes inducing credit card installment payments have been rampant recently, since these are commercial transactions, the exercise of the right of defense is likely to be restricted.

The Financial Supervisory Service warned, “It should be noted that there are cases where exercising the right of defense for installments is restricted,” adding, “According to Supreme Court precedents, transactions for profit, not solely for consumption, may also be included.” It further explained, “Receiving investment funds (advance payments) via credit card and paying dividends or fees is a fraudulent method to deceive consumers seeking profit and embezzle advance payments,” emphasizing, “Consumers should remember that contractual responsibilities agreed upon between consumers and fraudsters rest with themselves and be careful not to be deceived.”

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