Fair Trade Commission Monitors Prepaid Fund Misappropriation by Mutual Aid Companies... "Warning to 5 Companies"

Among 81 Locations, 5 Have an Average Preservation Rate of 40.4%
Consumer Compensation for Closures and Bankruptcies
Is Below the 50% Mandated by the Installment Transaction Act
"Check Whether the Company Is Registered and How to Receive Compensation"

Photo by Korea Fair Trade Commission

[Asia Economy Reporter Moon Chaeseok] "You must check the financial information of the Sangjo company and the advance payment preservation ratio of 50%."

The Fair Trade Commission emphasized that consumers themselves should carefully check whether the Sangjo company can refund the advance payments.

On the 8th, the Fair Trade Commission made this request through the 'Disclosure of Major Information of Prepaid Installment Transaction Operators in the First Half of 2020 (as of the end of March)' data.

According to the Fair Trade Commission, among the 81 companies surveyed, 5 did not meet the preservation ratio, with an average of 40.4% (3.56 billion KRW). This is 9.6% (about 847 million KRW) less than the legally required preservation ratio.

The number of subscribers to these companies is 20,000, accounting for 0.33% of the total, and the size of the advance payments is 8.82 billion KRW, which is 0.1% of the total 5.8838 trillion KRW. The total size of advance payments increased by 5.35% (298.9 billion KRW) compared to the second half of last year.

Under the Installment Transaction Act, Sangjo companies must keep more than 50% of advance payments in banks or insurance institutions in case of closure or bankruptcy. The company pays 50% of the advance payments as consumer damage compensation.

This is mainly preserved through mutual aid associations, bank deposits, and payment guarantees.

Hong Jeongseok, head of the Installment Transaction Division at the Fair Trade Commission, said, "Sangjo companies are required to strengthen their financial soundness in the future and restore consumer trust through efforts to prevent consumer damage in advance."

In addition, the Fair Trade Commission urged consumers to check whether the Sangjo company is registered as a prepaid installment transaction operator and to confirm the method of receiving damage compensation in case of bankruptcy or closure.