Prepaid Funeral Service Industry on Edge Over Tighter Regulations on Advance Payment Management: "Could Hamper Normal Business Operations"

[Financial News] The prepaid funeral service industry is tightening internal controls over the management of advance payments. The move comes as the government seeks to impose stricter oversight on how prepaid funeral service companies holding large amounts of advance payments manage their funds. While major companies already manage advance payments through their own review bodies, concerns are growing that smaller firms could face heavier staffing and cost burdens.
 According to industry sources on the 21st, the Fair Trade Commission prepared an amendment last month to the Consumer Protection Guidelines for Prepaid Installment Transactions. The amendment requires prepaid funeral service companies holding at least KRW 100 billion in advance payments to establish and operate an Advance Payment Management Review Committee. The measure is intended to review the stability of fund management and improve decision-making transparency, similar to investment review committees at financial companies.
 Prepaid funeral service companies have traditionally been classified as prepaid installment transaction operators and subject to advance payment preservation obligations. However, specific internal control standards for fund management have been inadequate.
 KYOWON Life manages its funds after reviewing factors such as stability and profitability through an Investment Review Committee. At least 50% of its advance payments are managed through deposits with first-tier financial institutions and payment guarantees.
 Woongjin PreedLife maintains a separate asset management division staffed with specialists and operates an Investment Review Committee that deliberates on key matters related to advance payment management. Individual investments undergo review by the committee and the board of directors. For major agenda items, including transactions with related parties and investments in high-risk assets, the company requires opinions from external experts such as accounting and law firms.
 An amendment to the Installment Transactions Act, which passed the National Assembly plenary session last month, also limits the total amount of credit extended to controlling shareholders and related parties to no more than 50% of the company's capital. The measure is intended to enhance transparency in fund management, given that consumers make payments over an extended period before receiving services from prepaid funeral service companies.
 The prepaid funeral service industry agrees on the need for stronger controls over advance payments but is concerned that the regulations could hurt businesses depending on their scope. Critics point out that smaller companies with limited staffing and financial resources could face heavier compliance burdens and experience management difficulties.
 Because these companies generate revenue by managing advance payments, tighter regulations could make business expansion more difficult. If short-term loans between affiliates or receivables and payables arising from ordinary commercial transactions are also brought under the regulations, even normal fund management could be curtailed.
 An industry official said, "Major prepaid funeral service companies have the staffing and financial resources to support compliance, but many smaller firms do not and could even be forced out of the market. Stronger oversight of advance payments is necessary, but the guidelines must reflect the characteristics of the industry."


[email protected] Jumi Lee Reporter