Funeral service companies with prepayments exceeding 100 billion won must establish and operate a prepayment management committee and seek external expert opinions when reviewing transactions with related parties or high-risk asset investments.
The Fair Trade Commission announced that these measures will take effect starting October 23, as part of revised 'Consumer Protection Guidelines for Prepaid Installment Transactions.'
Prepayments refer to the money consumers pay in advance for future services, such as funerals. The revision aims to ensure that companies assess the risks involved in managing these funds. It emphasizes the need to secure not only profitability but also timely funds for future service provision and refund payments.
The revised guidelines require prepaid installment transaction providers, including funeral service companies, to balance stability, liquidity, and profitability when managing prepayments. They also mandate thorough review procedures before excessive investments in high-risk assets, such as leveraged financial products, or transactions that provide undue benefits to controlling shareholders.
New internal control standards have been established to support these measures. Companies must develop guidelines for investment review and risk management and create operational plans for each fiscal year.
Companies with prepayments exceeding 100 billion won are also required to establish and operate separate review committees to enhance the stability of fund management and transparency in decision-making. When reviewing transactions with related parties or high-risk asset investments, the committee must consult with external experts in accounting or employees affiliated with the payment obligor under the installment transaction law.
A Fair Trade Commission official stated, 'We plan to encourage prepaid installment transaction providers to establish internal control systems in accordance with the revised consumer protection guidelines through meetings and discussions.'
* This article has been translated by AI.
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