Watchdog demands auto lease overhaulThe Korean fair trade watchdog on Monday ordered nine automobile lease operators to eliminate five unfair terms and conditions that shift costs onto borrowers.
The Fair Trade Commission (FTC) said that practices such as making lessees pay for parts of the car’s acquisition and registration taxes infringe on local tax codes, which state that a car’s taxes are supposed be paid by its owner, in this case the lease company.
The nine operators are both foreign and local financial companies that specialize in financing cars: Hyundai Capital, BMW Financial Services Korea, Mercedes-benz Financial Services Korea, Shinhan Capital, Samsung Card, Hana Capital, BNK Capital, Lotte Capital and Shinhan Card.
The FTC said that the nine companies have engaged in unfair business practices like charging extra fees even before the user actually picks up the leased car; making lease customers take responsibility for damage done to a vehicle before they receive it; and limiting customers’ ability to receive their lease deposits back.
The FTC did not levy any fines, but ordered the companies register revised terms and conditions with the Financial Supervisory Service (FSS) by mid-May and immediately start using the new terms after the FSS’s approval.
After the new terms go into effect, all nine lease service operators will have to exclude acquisition and registration taxes from the consumer fees. Hyundai Capital, BMW Financial Services, Shinhan Capital, Shinhan Card, Samsung Card and Mercedes-Benz Financial Services will have to begin charging consumers at the point when they pick up their car, instead of when they sign the lease document or register for lease insurance. Lotte Capital and Shinhan Card were ordered to eliminate an entire clause that made the lease consumers fully responsible for damage done to the car by other drivers before they even signed the lease contract.
According to the Credit Finance Association, the local auto lease market has grown over the past few years to 6 trillion won ($5.5 billion) in 2013 from 4 trillion won in 2009.
At the same time, the number of complaints filed with consumer agencies has also increased, recording 607 incidents in 2013, up from 304 in 2010. Most of those complaints involved terms and conditions written to benefit lease companies.
BY KIM MIN-SANG, KIM JI-YOON [firstname.lastname@example.org]
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