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Credit Transaction

A credit transaction is the act of a financial institution lending funds to an individual or corporate customer. When such a transaction is conducted in violation of the Specialized Credit Finance Business Act, criminal punishment may result.

CONTENTS
  • 1. Credit Transaction | Definition
    • - Credit Transaction | Specialized Credit Finance Business Act
  • 2. Credit Transaction | Disposition of Violations
    • - Imposition of a Penalty Surcharge
  • 3. Credit Transaction | When a Dispute Arises
    • - Dispute Mediation Through the Financial Supervisory Service
    • - Resolution Through a Small Claims Trial
  • 4. Credit Transactions | Safe Block Service
  • 5. Credit Transactions | Strategy Development

1. Credit Transaction | Definition

Daeryun Law Firm, financial institutions, credit transactions and loan fraud practice areas



A credit transaction is one form among the many types of financial transactions, loans included, and it is an important financial service that helps businesses and individuals borrow funds or draw on credit to consume or invest.

The familiar loan transactions with banks are also included in credit transactions.

Transactions with specialized credit finance companies, such as card companies, installment finance companies, and leasing companies, are likewise a type of credit transaction, and credit transactions may also be conducted with secondary financial sector companies such as mutual savings banks.

Credit Transaction | Specialized Credit Finance Business Act

The Specialized Credit Finance Business Act is a statute that governs the regulation of credit transactions, and it mainly contains provisions on the business activities of specialized credit finance companies.

The Act works to prevent the legal problems that can arise when a specialized credit finance company extends loans and credit, and to promote consumer protection and the sound operation of the financial market.

It also sets out the basic conditions of credit transactions, such as loan limits, interest rates, repayment periods, and collateral.

In this way, it guards against unfair financial transactions and gives financial consumers the protection they need.

Financial institutions and individuals that conduct credit transactions must comply with the Act, and a violation may lead to criminal punishment and administrative disposition.

2. Credit Transaction | Disposition of Violations

The principal violations that may arise in the course of a credit transaction, together with the corresponding punishment standards, are set out below.

Such acts are strictly prohibited under the Specialized Credit Finance Business Act, and a violation may bring serious criminal punishment and monetary sanctions.

▶ Violations

• Forging or altering a credit card or the like

• Selling or using a forged or altered credit card or the like

• Selling or using a lost or stolen credit card or debit card

• Acquiring a forged or altered credit card or the like for the purpose of use

A person who has committed an act such as those above is subject to the following punishment.

▶ Level of Punishment

Specialized Credit Finance Business Act

Article 70 (Penalty Provisions)

Imprisonment for up to 7 years or a fine of up to 50 million won

A person who falls under any of the following is subject to imprisonment for up to 5 years or a fine of up to 30 million won.

• A large credit card merchant that demands an unfairly low merchant fee rate from a credit card business entity

• A large credit card merchant that demands or receives an unfair consideration on the grounds of a credit card-related transaction

• A credit card business entity or value-added network operator that provides an unfair incentive to a large credit card merchant and its specially related persons

Imposition of a Penalty Surcharge

A specialized credit finance company, for example a card company, a leasing company, or an installment finance company, may conduct business only within the scope of business prescribed by law.

In other words, a company that engages in business it is not permitted to conduct becomes subject to sanctions.

Under Article 46 of the Specialized Credit Finance Business Act, a specialized credit finance company may conduct the following business.

• Licensed or registered specialized credit finance business (for example, leasing, installment, and card business)

• Acquisition, management, and collection of accounts receivable

• Loan and bill discounting business

• Credit-card-related ancillary business

• Credit investigation business connected to its operations

• Incidental business utilizing its personnel, assets, and facilities

If a company acts beyond this scope, a penalty surcharge of up to 300 million won may be imposed.

3. Credit Transaction | When a Dispute Arises

Finance attorney, credit transactions and punishment for violation of the Credit Finance Act practice areas

A range of disputes may arise between a financial company and a consumer in the course of a credit transaction, and such disputes can be addressed not only through litigation but also through prompt and efficient channels, such as the dispute mediation system of the Financial Supervisory Service or the small claims adjudication procedure of the court.

Dispute Mediation Through the Financial Supervisory Service

When a dispute over a credit transaction arises with a financial company such as a credit card company, the financial consumer may turn to the financial dispute mediation system, which allows the dispute to be resolved through the Financial Supervisory Service without litigation.

The system resolves disputes fairly through the mediation of a neutral mediation committee, and it plays an important role in protecting the rights and interests of financial consumers and supporting the stability of the financial market.

1. Application for Dispute Mediation

An interested party may apply for dispute mediation by several methods, including the Financial Supervisory Service website, mail, fax, and an in-person visit, and the application form must state the applicant's name, contact information, and the details of the dispute.

2. Investigation and Recommendation for Settlement

The Financial Supervisory Service investigates the facts of the complaint it receives, and if the requirements for a mediation application are met, it may recommend a settlement to the financial company.

If litigation has already been filed, however, or if the application requirements are not satisfied, the application may be rejected.

3. Review by the Dispute Mediation Committee

If a settlement is not reached, the Financial Supervisory Service refers the case to the Financial Dispute Mediation Committee.

The committee renders a mediation decision after hearing the parties, and the parties are notified of the content of that decision.

4. Acceptance of the Mediation and Its Effect

If a party accepts the mediation decision within 20 days, the mediation is established, and it then carries the same effect as a judicial settlement.

If it is not accepted, the mediation is treated as void.

5. Re-mediation and Filing of a Lawsuit

If a significant new fact comes to light or there is a serious procedural defect, a party may apply for re-mediation within one month from the date the decision is notified.

If litigation is proceeding in parallel, that fact must be reported to the Financial Supervisory Service without delay, and the mediation procedure may be suspended where certain requirements are met.

Resolution Through a Small Claims Trial

Where a dispute over credit card charges arises with a credit card company, the matter may be resolved through the small claims trial procedure.

Compared with ordinary litigation, this procedure is simpler, less costly, and notable for how quickly it moves.

1. Filing of a Small Claims Trial

A credit card member or other party may file a small claims trial with the court in writing or orally.

2. Recommendation for Performance to the Defendant

Once the lawsuit is filed, the court recommends that the defendant, the credit card company or merchant, perform in accordance with the relief the plaintiff seeks.

If the defendant does not file an objection within 2 weeks, or if the objection is rejected or withdrawn, the recommendation for performance carries the same effect as a final judgment.

3. Conduct of Oral Argument

Oral argument is usually held in a single session, and the judge examines the parties and related persons and may, where necessary, require the submission of written documents.

4. Pronouncement of Judgment

Judgment is pronounced immediately upon the conclusion of oral argument.

By cutting cost and time and delivering prompt judgments, the small claims trial procedure is well suited to the efficient resolution of monetary disputes with credit card companies.

4. Credit Transactions | Safe Block Service

Daeryun Financial Group Credit Transaction Safe Block Service
Source : Financial Services Commission

As non-face-to-face financial transactions have grown and the digital transition has accelerated, methods of financial fraud, such as the theft of personal information through the installation of malicious apps, have grown increasingly sophisticated.

The credit transaction safe block service is an institutional mechanism that lets a financial consumer, at the consumer's own discretion, block new credit transactions, such as unsecured loans, card loans, and credit card issuance, in advance.

When a consumer subscribes to the service, the safe block information is registered with the Korea Credit Information Services, and from that point on, new credit transactions across the financial sector under that consumer's name are blocked in real time.

This effectively prevents financial harm caused by loans or credit transactions carried out without the consumer's knowledge.

▶ Institutions Where You Can Apply
• Banks
• Nonghyup, Suhyup
• Post offices, etc.

▶ Required Documents
No documents other than an identification card (resident registration card, driver's license, etc.) need to be submitted

If a credit transaction such as an unsecured loan or credit card issuance later becomes necessary, the consumer may apply to lift the block in the same way, by visiting a branch of the relevant financial institution in person.

In this process, however, the financial institution carefully reviews the reason for the cancellation and the identity of the applicant in order to assess the possibility of voice phishing, identity theft, and similar risks.

5. Credit Transactions | Strategy Development

Daeryun Finance and Insurance Group Credit Transaction Legal Advisory Practice Area

A credit transaction is more than a simple financial transaction. It is a complex legal relationship that calls for a thorough understanding of the relevant statutes and regulations and the various means of resolving disputes, along with a response to them.

Matters such as the fraudulent use of a credit card or losses arising from a card company's negligence do not end as simple consumer complaints. When they remain unresolved even after dispute mediation, they may give rise to civil litigation.

Because a matter can escalate into a legal dispute in this way, it helps to organize the facts accurately and set a legal response strategy at an early stage.

Our firm provides comprehensive legal services across the full reach of the Specialized Credit Finance Business Act, including legal advice, representation in various procedures, and the conduct of litigation.

With the possibility of an actual dispute in mind, we also offer practical support that ranges from preventive risk review to subsequent remedies.

If you are facing a legal dispute related to a credit transaction, you are welcome to reach out to us at any time.

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