"Unilateral Clauses Not Allowed"... KFTC Imposes Major Sanctions on Unfair Terms by Credit Card and Leasing Companies

[Financial News] The Korea Fair Trade Commission (KFTC) has requested revisions to unfair terms and conditions used by credit card companies, leasing companies, and installment finance companies that infringe on the rights and interests of financial transaction customers.
On the 17th, the KFTC announced that it had reviewed 1,668 sets of terms and conditions operated by Specialized Credit Finance Companies and requested the Financial Services Commission (FSC) to correct 46 clauses across 9 types.
The KFTC annually reviews financial transaction terms and conditions newly created or revised by banks, Specialized Credit Finance Companies, and Financial Investment Business Entities. In October, the KFTC requested the FSC to revise unfair terms in the banking sector. This time, it reviewed the terms in the specialized credit finance sector and requested corrective action.
One of the main types of unfair terms identified was the inclusion of jurisdiction clauses that are unreasonably disadvantageous to customers. The Financial Consumer Protection Act, revised in July 2023, stipulates that lawsuits related to non-face-to-face financial product contracts must be filed in the district court with jurisdiction over the financial consumer’s address. However, some financial companies still specify their own jurisdiction in contracts. The KFTC requested revisions to these clauses in line with the intent of the amended law, which aims to strengthen consumer rights.
Another problematic clause allowed businesses to unilaterally suspend or limit credit card additional services for reasons that are difficult for customers to predict. The KFTC found clauses that permitted the restriction of services or the suspension of rewards and discounts solely due to circumstances of affiliates or merchants. Such provisions grant businesses the authority to unilaterally determine or alter benefits without sufficient justification, which was deemed unfair to customers.
Additionally, in relation to facility leasing, there were clauses in leasing contracts that restricted counterclaims or set-offs regarding payments (such as lease fees or late payment penalties) made by customers. The KFTC determined that these clauses unfairly excluded or limited legally protected rights to raise objections or set-offs without sufficient reason.
Furthermore, the KFTC found it unfair for contracts to allow termination or cancellation based on broad and vague reasons, as such clauses could unduly disadvantage customers.
The KFTC stated, "Through these requested revisions, we expect that improvements to credit card terms and conditions, which are closely linked to consumers’ daily lives, will help prevent financial consumers and corporate clients from suffering damages due to unfair terms."
Meanwhile, the KFTC plans to swiftly address unfair terms in the financial investment and peer-to-peer lending (P2P lending) sectors, following its actions in the banking and specialized credit finance sectors. The commission will also continue to work closely with financial authorities to prevent the repeated use of unfair terms and conditions.
hippo@fnnews.com Kim Chan-mi Reporter