From now on, prepaid installment transaction businesses, including funeral service plan companies, will be restricted from providing credit to controlling shareholders and specially related parties to within 50% of their capital.
The Korea Fair Trade Commission said on the 20th that a bill to amend the Installment Transactions Act with these provisions at its core passed the National Assembly's plenary session. There had been no rule restricting credit provision by prepaid installment transaction businesses, and this is newly established.
According to the amendment, the amount that a prepaid installment transaction business can provide as credit to controlling shareholders, such as through lending or payment guarantees, is limited to within 50% of its capital. If the credit provision exceeds the limit, imprisonment of up to three years or a fine of up to 100 million won will be imposed. When providing credit, unanimous consent of all incumbent executives or approval by the board of directors is required. An obligation was also added to report to the Korea Fair Trade Commission (FTC) afterward and disclose the information on the internet.
Also, previously, business suspension was possible only when there were serious prohibited acts such as failing to conclude a consumer damage compensation insurance contract, but going forward, business can also be suspended in cases of ▲ nonpayment of contract cancellation refunds ▲ unauthorized use of consumer information ▲ exceeding the credit provision limit to controlling shareholders. Furthermore, an obligation to preserve records of prepaid installment contracts has been newly established so consumers can view contract cancellation refunds and documents related to contract termination at any time for up to five years from the time of contract cancellation.
A provision was also created to revoke approval for establishing a mutual aid association that compensates a portion of advance payments to consumers when a prepaid installment transaction business closes. Under the amendment, approval for establishment may be revoked if investment falls short or if corrective orders are not complied with three or more times in the past five years.
On the same day, an amendment to the Monopoly Regulation and Fair Trade Act requiring the Korea Fair Trade Commission (FTC) to submit relevant materials when victims of unfair trade practices file damages suits also passed the National Assembly's plenary session. Unless the materials fall under statutory exceptions such as trade secrets, the FTC must submit them to the court. A procedure was also codified allowing complainants to request a reinvestigation of cases the FTC has determined to be cleared of charges.
A Korea Fair Trade Commission (FTC) official said, "The amended laws will be promulgated after going through procedures including a Cabinet meeting," and "They are scheduled to take effect one year from the promulgation date."