"4.2 Million Won Paid by the Deceased"…Funeral Service Companies Must Notify Annually

Fair Trade Commission Revises Installment Transaction Act Enforcement Rules
From March, 'Prepaid Installment Transaction' Products
Consumers Informed of Payment Amounts and Installments

[Image source=Yonhap News]

The late Hong Boksun had signed up for a funeral service package worth 4.2 million won during her lifetime at the recommendation of an acquaintance. She wanted to ensure that her children would not be burdened with funeral expenses in their time of grief after her passing. She completed the payment by paying 28,000 won monthly for 150 installments. However, after Hong’s death, her bereaved family, who were completely unaware of the funeral service subscription, neither received proper funeral services nor got back the payments she had made.

Starting from March, businesses selling 'prepaid installment transactions' products such as funeral services or installment travel packages will be required to annually inform consumers of their subscription details, including payment amounts and the number of installments.

The Korea Fair Trade Commission announced on the 9th that it has revised the "Enforcement Rules of the Installment Transactions Act" and the "Consumer Protection Guidelines for Prepaid Installment Transactions" to include these provisions.

This revision is a follow-up measure to the amendment of the "Installment Transactions Act" last March and will be implemented on March 22, the date the notification system takes effect. It aims to prevent cases like Hong’s, where consumers forget they subscribed to funeral services or fail to inform their families, resulting in neither receiving appropriate services nor recovering their payments.

According to the revised enforcement rules, prepaid installment transaction businesses must notify consumers who have entered into prepaid installment contracts, such as funeral services or cruises, of information including payment amounts, number of payments, and contract date at least once a year.

Notifications can be made through various methods such as phone calls, emails, text messages, or KakaoTalk, and records of notifications must be kept for five years. Additionally, consumers who have completed payments but have not yet used services like funerals or travel (maturity payment consumers) must also be notified.

Until now, consumers who subscribed to prepaid installment products like funeral services found it difficult to check their payment amounts or number of payments unless they directly inquired with the business via phone or website.

Moreover, these products typically have an average contract period of about 10 years, making it difficult for consumers to remember the fact of their contract or its key details.

A Fair Trade Commission official expressed expectations that "through this revision, approximately 8.33 million consumers (as of the end of Q1 last year) who have subscribed to prepaid installment products such as funeral services and installment travel will receive annual notifications of payment amounts and number of payments starting this March, significantly strengthening consumer protection in the prepaid installment transaction sector."

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