PG Company-Travel Industry Blame Game Escalates in Timeff Incident... Consumer Loss Sharing Debate Emerges [Why&Next]

Since the outbreak of the delayed settlement payment incident involving 'Timef' (Timon and Wemakeprice), refund procedures for general products have been gaining momentum, but issues regarding refunds for travel products and gift certificates have escalated into disputes between industries, making resolution difficult. There are also criticisms that it is unfair to place the burden on private companies rather than Timef under the pretext of consumer protection, leading to discussions that consumers may inevitably have to bear some losses.

According to the financial sector on the 9th, card companies and PG (payment gateway) companies handling payment cancellations and refunds for Timef consumers have refunded about 30,000 cases worth 4 billion KRW to consumers from the 23rd of last month to the 6th of this month, but most procedures for travel products and gift certificates are currently on hold. On the 7th, the government announced a response plan through the Economic Ministers' Meeting to support refund procedures or normal use of travel products and gift certificates in cooperation with the industry, but the method remains unclear.

Travel Industry vs. PG Industry, Intensifying Responsibility Disputes

[Image source=Yonhap News]

The Korea Consumer Agency is accepting applications for collective dispute mediation regarding refunds for travel-related products purchased from Timon and Wemakeprice until 11:59 PM on the 9th. According to the Consumer Agency, as of 9 AM on the same day, the number of applications totaled 7,687. The collective dispute mediation system resolves disputes collectively when many consumers suffer the same or similar types of damage, and considering the scale and severity of this incident, it is expected to play a more important role than ever.

Furthermore, the government recently announced a response plan through a joint effort of related ministries to proceed with refund procedures in cooperation with card companies, PG companies, issuers, and travel agencies. However, since this imposes a significant burden on each industry, conflicts between industries have escalated. There have already been public statements from PG companies and the Korea Association of Travel Agents regarding the burden of refund payments. The Travel Association stated on the 6th, "Travel agencies have not received any payment for travel product sales but are solely bearing the responsibility for fulfilling travel contracts," and added, "Forcing contract fulfillment or bearing cancellation refund responsibilities despite knowing the increasing scale of damages could constitute breach of trust."

In response, a travel agency official said, "I wonder why the association had to issue a statement. Primarily, the issue of payment cancellations lies with PG companies, but as PG companies increasingly raise their voices and try to shift responsibility to the travel industry, the association took action." The official also emphasized that travel agencies are victims, saying, "At a recent meeting held by the Ministry of Culture, Sports and Tourism and the Fair Trade Commission with travel agencies, director-level officials listened to the damage status and structural problems of the travel industry and said they would try to support through consultations with other ministries."

The next day, PG companies such as KG Inicis, KG Mobilians, and NHN KCP jointly issued a press release warning, "If travel agencies continue to shift losses by riding on PG companies' payment cancellations, we will prepare legal action." They also pointed out, "Some travel agencies are inducing consumers to re-pay after payment cancellations to avoid bearing losses," calling it a violation of the service fulfillment obligation under the Electronic Commerce Act. However, travel agencies explain that they are assisting consumers in converting reservations, not inducing re-payments.

Card companies are also reluctant to share losses. A card company official explained, "Under the Specialized Credit Finance Business Act, the party responsible for cancellations at lower-tier merchants is the PG company, and card companies cannot unilaterally cancel without PG company approval," adding, "Not collecting the money owed would go against shareholder interests and could raise breach of trust issues."

Due to these disputes between industries, the government has yet to present a concrete plan on how to cooperate. Both the government and industries are awaiting the results of the Korea Consumer Agency's collective dispute mediation, but since the process usually takes about six months and lacks legal binding force, questions about its effectiveness are being raised.

Gift Certificate Refunds: One Hurdle After Another

[Image source=Yonhap News]

Unlike travel products, which are approaching collective dispute mediation procedures, gift certificate refunds are expected to be further delayed. Currently, there is no law regulating gift certificates, and there is no competent ministry to practically mediate the issue. Moreover, Happy Money, a representative gift certificate sold by Timon and Wemakeprice, is issued by Happy Money Inc., which is in a state of capital erosion and facing bankruptcy due to unpaid settlement payments, making self-compensation nearly impossible.

Some argue that whether a gift certificate is refundable depends on whether the PIN number has been sent. This stems from the fact that gift certificates can be used immediately after purchase if a PIN number is issued, making it difficult to verify actual usage. A PG company official explained, "PG companies cannot know whether customers have received or used the gift certificates. In such cases, even if they claim subrogation rights against Timef, they cannot recover money, so refunds are on hold." This seems to reflect concerns about fraudulent transactions during the gift certificate refund process.

Attorney Shim Gyudeok of Law Firm Shim, representing victims of Timon and Wemakeprice, said, "There are claims that Timon and Wemakeprice gift certificates cannot be refunded because there is a threat that consumers might use the stored PIN numbers after refund, but currently, there is nowhere to use those PIN numbers," adding, "If usage is blocked like with Happy Money, the PIN number has no value, so refunds should be made." He also added, "Even if consumers agreed to terms stating refunds are impossible after receiving the PIN number, that only applies when the PIN number still has value."

Professor Seo Jiyong of Sangmyung University’s Department of Business Administration argued that the current situation imposes an unfair burden on private companies. He said, "I understand the intention that someone must share the pain for consumer protection or market order, but I am not sure if it is right to encourage a specific company to bear that pain. If it must be done, the government, which failed to prevent this incident from the start, should first compensate consumers and then claim subrogation rights against Timef," he criticized.

An anonymous attorney said, "Since Timef, which is fully responsible, is unable to refund, consumers inevitably have to share losses in principle. Especially for gift certificates, if not used immediately after purchase, their value can become uncertain, so consumers took that risk when purchasing," he explained.

An official from the Fair Trade Commission, the competent ministry for the Korea Consumer Agency, said, "I understand that there are quite a few consultations regarding gift certificates," adding, "If the number exceeds a certain level, the Consumer Agency may consider collective dispute mediation procedures."