Get a Free Refrigerator When You Sign Up? Installment Bomb When You Cancel [Heotdari Economy]

(35) When Joining Sangjo Combination Service, Home Appliances May Become a Burden Instead of Freebies

Editor's NoteMany people thought they were engaging in smart economic activities to get something better, but it often turned out to be a misstep. When consumers are deceived by corporate marketing or blinded by momentary gains and make wrong decisions, they end up being the ones who suffer. We aim to examine economic activities where people have made mistakes by misjudging everyday situations and ended up on the losing side.

"The appliances supported at the time of subscription are my property. 100% refund of the amount paid at maturity is possible." Funeral service companies promote combined products with appliances like refrigerators and TVs advertised as 'free gifts.' It sounds tempting as if you can get the desired products for 'free' upon signing up, but you must carefully check the specifications and prices of the electronic products bundled before signing the contract.

Lee Hye-joo (41), who was planning to buy a refrigerator, signed a contract after seeing an advertisement that offered a refrigerator as a free gift when joining a funeral service. The advertisement stated that after a 60-month contract period, services such as funerals, weddings, or cruise trips could be provided. She signed the contract after a counselor explained that it was more reasonable than renting a refrigerator, but problems arose when she tried to cancel. She was told that because she received the refrigerator as a free gift, the money she paid could not be refunded. The funeral company said that the amount she paid over 5 years was considered the price of the refrigerator. When she asked if it was not a free gift, the only response was "the gift is only given upon full payment." The price of the refrigerator applied by the funeral company was higher than the market price.

A member of an online community also expressed dissatisfaction, saying that after joining a funeral service and trying to cancel, they could only get back half of the amount paid. He said, "I paid a total of 750,000 KRW over 38 installments, but when I tried to cancel, they only refunded 320,000 KRW." Another netizen said, "I was a member for 4 years but only got back 60% of the principal."

Graph of Claims for Relief Related to Funeral Services from 2019 to June 2024.

According to the Korea Consumer Agency, there were a total of 891 consumer damage relief applications related to funeral services over the past five years (2019?June 2024). In the first half of this year alone, there were 66 cases. The highest proportion of complaints involved contract cancellations, terminations, and penalties, totaling 487 cases over the past five years (2019?June 2024). Unfair practices accounted for 183 cases, and contract non-fulfillment (incomplete performance) for 126 cases. There were 59 cases related to withdrawal of subscription. Additionally, there were 36 cases concerning prices, fees, interest, commissions, quality/after-sales service complaints, terms and conditions, and others (simple inquiries, labeling/advertising, etc.).

Funeral service combined products are based on the principle of 100% refund at maturity. The monthly payment varies depending on the necessary appliances, but it is advertised that you can own the appliances if you pay until maturity. Besides funeral services, depending on the amount paid, you can also receive services such as weddings and travel. However, these funeral service contracts are long-term. Although it varies depending on the contract, the period is about 8 to 18 years. Therefore, if the product is bundled with appliances, you need to examine the contract carefully. Even after paying for several years, you might not get back even half of the refund and may have to continue the contract reluctantly. Refund criteria differ depending on the total amount paid and the number of installments for each funeral company.

For example, Funeral Company A calculates the appliance installment payment as a free gift for up to 60 installments (5 years) out of a 200-installment (about 16 years) maturity. You must pay for at least 120 installments (10 years) to receive any refund upon cancellation. Even then, it is not a 100% refund. Funeral Company B, based on a 220-installment (about 18 years) maturity, considers the first 60 installments (5 years) as the appliance installment payment period. You must pay at least 160 installments (about 13 years) to get a partial refund upon cancellation. Again, it is not a 100% refund.

[Image source=Pixabay]

The parts initially advertised as 'service' and 'full support' are actually based on the 'maturity (full payment)' standard, but each funeral company applies different criteria for the appliance installment payments. If you cancel before the set period, you must return the entire price of the electronic product, including installment interest. You should also keep in mind that the appliance prices applied by funeral companies are higher than regular retail prices. It is essential to compare the desired product and its release date. Even if you pay the same amount, there can be a price difference of 800,000 to 3,000,000 KRW depending on the funeral company. When the reporter directly consulted a funeral company, the counselor explained, "Appliance stores offer their own discounts, but funeral companies set the price based on the 'regular price' of the electronic products."

Professor Kim Si-wol of Konkuk University's Department of Consumer Studies said regarding funeral service products bundled with appliances, "There should be a duty to inform about the market price of the appliances and the discount rate when combined with funeral services." Consumers should be able to easily verify the discount amounts or benefits they receive when subscribing to the product. He also said, "Important details and frequently complained items during funeral service subscriptions should be emphasized more during contract signing to reduce consumer confusion, and the Fair Trade Commission should provide clear guidelines for combined product contracts."