Prohibition of Debt Collection from Family for Card Delinquency... Financial Supervisory Service Revises Standard Terms

Notice on the Use of the Right to Withdraw from Loan Contracts

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[Asia Economy Reporter Kim Hyo-jin] Credit card companies will be explicitly prohibited from collecting overdue debts from family members. Cash advances will only be available if separately requested at the time of card issuance.

The Financial Supervisory Service (FSS) announced on the 9th that it will revise the "Standard Terms and Conditions for Individual Members" to include these provisions in order to enhance the rights and interests of card consumers.

The FSS decided to explicitly prohibit card companies from collecting overdue debts of the primary cardholder from family members to prevent unfair collection practices. Currently, there are no provisions related to the issuance and management of family cards in the standard terms and conditions.

The FSS will also revise the terms to require that information such as annual fees, the number of cards that can be issued, and conditions for using additional services be clearly stated and provided in the family card product description.

Cash advances will, in principle, only be available if separately requested at the time of card membership enrollment.

This aims to prevent disputes arising from automatic cash advance limits being set without the customer's consent when a new card is issued, especially in cases of theft or loss.

If a cardholder wishes to use cash advances after card issuance, they must undergo credit screening and other procedures.

The FSS will also improve the terms to inform debtors that they can exercise the right to withdraw from a loan contract if their intention to cancel a card loan is unclear, allowing the debtor to make a choice.

This is because even though the right to withdraw from a loan contract can be exercised within 14 days after a card loan is taken out, it is currently processed as early repayment without confirming the debtor’s intention, which may affect their credit rating.

In the case of card loans, if processed as a withdrawal, the loan record disappears, but if processed as early repayment, the record remains.

The current system, which notifies the scheduled extension of revolving credit and automatically renews it for the existing contract period if no objection is raised within one month, will be changed to explicitly state that "if there is no indication of termination, it is considered consent to the extension."

Additionally, the notification cycle for members not using revolving credit will be shortened from the current 18 months to 12 months, and the notification methods will be expanded to include at least two of the following: written notice, phone call, email, or text message.

A system will also be introduced to guide cardholders on points held and inheritance methods when the card company learns of a member’s death through inheritance financial transaction inquiry requests.

Card companies will be able to notify users of related matters via mobile messengers such as KakaoTalk, and improvements will be made to require prior notification to debtors when the benefit of the term is lost due to debtor bankruptcy or compulsory execution.

The revised standard terms and conditions will be implemented in January next year after going through notification procedures for members.