(Sejong = Yonhap News) Reporter Kim Soo-hyun = The total amount of credit that a mutual aid company can provide to controlling shareholders is limited to 50% of the capital.
The legal basis for the Fair Trade Commission to conduct an investigation into the status of prepaid installment transaction companies has been established, and the reasons for suspending the business of prepaid installment transaction companies have also been expanded.
The Fair Trade Commission announced that the amendment to the Installment Transactions Act (Instalment Transactions Act) containing these contents passed the plenary session of the National Assembly on the 20th.
The revised Installment Transaction Act limits the total amount of credit, such as loans and payment guarantees, that mutual aid companies can provide to 'controlling shareholders' who own more than 30% of the total number of issued stocks to within 50% of the capital.
It was specified that if the rental exceeds the limit, the maximum penalty under the Installment Transaction Act may be imprisonment of up to 3 years or a fine of up to 100 million won.
In addition, even if credit is extended to controlling shareholders within the credit extension limit, transactions exceeding a certain amount must be approved by all registered executives or approved by the board of directors.
In addition, it was required to report this to the Fair Trade Commission after the fact or to make it public on the Internet. Violation of this will result in a fine of up to 30 million won. The standard credit grant amount will be stipulated in a later enforcement ordinance.
Regarding the investigation of violations of credit grant limit regulations, the Fair Trade Commission and the Financial Supervisory Service also prepared the basis for forming a joint investigation team.
The reason the Fair Trade Commission revised the law in this way is to reduce the harm suffered by consumers due to a lack of capital as many prepaid installment transaction companies provide loans to controlling shareholders.
The revised law also established a new legal basis for establishing and operating an integrated information system for prepaid installment transactions.
Through the integrated information system, consumers can check the contract conclusion date, details of advance payments paid, as well as consumer damage compensation procedures and business-related information.
In addition, when a reason for payment of consumer damage compensation related to a prepaid installment transaction company arises, banks, mutual aid associations, etc. must notify the city/provincial governor of this, and the city/provincial governor has also specified the obligation to publicize this.
The revised law also added reasons for business suspension, such as non-payment of cancellation refunds, unauthorized use of consumer information, and exceeding credit extension limits related to controlling shareholders. The Fair Trade Commission expected that it would be able to quickly block the spread of consumer damage by adding reasons for business suspension, such as forcing the conclusion of existing contracts and failing to conclude consumer damage compensation insurance contracts.
In addition, the revised law stipulates that the Fair Trade Commission can pursue an investigation into the status of prepaid installment transactions.
In addition, for the responsible operation of the 'mutual aid association', which compensates consumers for a portion of the advance payment when a prepaid installment transaction business goes out of business, grounds have been prepared to revoke the establishment authorization if the mutual aid association has less than 20 billion won in equity capital and has failed to comply with corrective orders more than three times in the past five years.
In addition, executives and employees of mutual aid associations who receive disciplinary action or dismissal from the Fair Trade Commission for violating the law can now be immediately suspended from their duties.
If a mutual aid association fails to comply with a request for disciplinary action or dismissal of an executive or employee, a fine of up to 20 million won may be imposed.
The revised law is scheduled to be promulgated after being transferred to the government and approved by the State Council. It is scheduled to take effect one year after its promulgation.
The Fair Trade Commission plans to begin reorganizing subordinate laws as soon as the revised law is promulgated and prepare to ensure that the revised law can be implemented without setbacks.
