FTC proposes guidelines to boost transparency at prepaid installment firms

Korea's fair trade watchdog has proposed revisions to consumer protection guidelines for prepaid installment transactions, with the aim of enhancing transparency among operators managing customers' advance payments. The Fair Trade Commission (FTC) stated that the proposed changes would necessitate operators to develop internal guidelines for managing these payments and create a yearly management plan.

In Korea, funeral and travel service providers frequently utilize prepaid installment contracts, allowing customers to make a series of advance payments for services to be delivered at a later date. Under the new guidelines, operators would be obligated to consider stability, liquidity, and profitability when managing advance payments to ensure that enough funds remain accessible to fulfill contracted services and provide refunds in cases of cancellation.

Furthermore, the operators would need to conduct comprehensive reviews before investing in high-risk assets, such as derivatives. Operators managing KRW 100 billion ($72.1 million) or more in advance payments would be required to comply with these guidelines.