FTC proposes guidelines to boost transparency at prepaid installment firms

The South Korean Fair Trade Commission (FTC) has proposed revisions to consumer protection guidelines for prepaid installment transactions, with the aim of enhancing transparency in the management of customers' advance payments. These proposed changes would require operators to create internal guidelines for handling advance payments and develop a management plan for each fiscal year.

In South Korea, prepaid installment contracts are commonly used by funeral and travel service providers, where customers make a series of advance payments for services to be delivered at a later date. The proposed guidelines would necessitate operators to balance stability, liquidity, and profitability when managing these advance payments, ensuring that sufficient funds remain available to fulfill contracted services and provide refunds for cancellations.

Moreover, operators would need to conduct thorough reviews before investing in high-risk assets, such as derivatives. Specifically, companies with advance payments exceeding 100 billion won (US$72.1 million) would be required to establish a management review committee to oversee these guidelines' implementation.