'Ticket Insurance' Scheme Draws Regulatory Scrutiny

Consumers should be warned of groups that promise to pay traffic fines in return for a membership fee, an official at the Financial Supervisory Service said recently. These unauthorized businesses are violating the law.

The official said that an increasing number of consumers have paid fees to such businesses, but they should be aware of the risk of losing their money.

"One multi-level marketing scheme had about 80,000 members when we first heard of it in November," he said, "but we have learned that the number has increased to more than 300,000."

In that specific case, he said, losses could amount to as much as 300,000 won ($230) per person if the company fails or the owners simply decide to take the money and run.

The official said his agency recently asked the prosecution to begin investigations of such companies.

A 2000 act specifically prohibits the collection of funds from the public by other than insurance companies in return for a promise to compensate for future economic losses.

An official at one such company rebutted the charge of illegality. "We are not purporting to sell insurance plans," he said. "And none of our members have lost anything."

The official said a car insurance agent was reported to be involved in a scheme that offered discounts on auto insurance policies in return for a paid membership. The company is also reported to have offered membership to persons without valid driver's licenses.

by Huh Kwi-sik