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The Fair Trade Commission offices

“K,” the owner of an imported car, made up his mind to get rid of it after a traffic accident. But even though it had only been four months since he’d bought a 5 million-won (US$4,410) service package (specifically for imported cars, which are very expensive to service in South Korea) allowing discounts on a fixed number of exchanges for expendable parts like engine oil filters - and even though he had never used any of the services to date - the imported car companies refused his request for a refund, saying its contractual terms did not permit it.

Now consumers in the same situation will be able to end their contracts at any time and receive a full refund minus a penalty and the cost of any services actually used. The validity period for paid inspection coupons, which extends for just two to four years for some businesses, is also being extended to five years, during which time consumers can receive their balance back after paying a penalty.

The Fair Trade Commission (FTC) announced on Apr. 24 that it has taken corrective action after learning that seven brands of imported cars - Mercedes-Benz, Audi Volkswagen, Nissan, Honda, Citroen (Hanbul Motors), Chrysler (FCA Korea), and Jaguar Land Rover - had unfair contractual conditions limiting contract cancellation and banning refunds after the sale of paid service packages and quality assurance extension service packages.

Intended to reduce the burden of high parts and repair costs - which has been cited as the “Achilles heel” of imported car ownership - the paid service and quality assurance extension service packages normally cost between 3 million and 5 million won (US$2,640-4,410), with the most expensive packages reportedly running to over 10 million won (US$8,810).

Mercedes-Benz Korea, Jaguar Land Rover Korea, Nissan Korea, Hanbul Motors, and Honda Korea have refused refunds altogether once the paid service package has been sold. The FTC explained that customers will now be able to receive a refund on the price they paid for the package, minus the amount spent on any actual services to date and an appropriate penalty fee (typically 10% of the remaining service period).

Mercedes-Benz Korea, Audi Volkswagen Korea, and FCA Korea were caught setting their products’ validity period at two to four years - shorter than the five-year commercial claim statute of limitation according to civil law - and then refusing to give refunds once it had passed. Audi Volkswagen Korea and Honda Korea applied unfair conditions banning the transfer of service packages to other people. The FTC explained that customers have the right to a refund at any time within the five-year commercial claim statute of limitation period and are able to transfer service packages to vehicle owners meeting similar conditions.

According to the FTC, the companies took corrective action on their unfair contractual terms voluntarily during the investigation process. The FTC also discovered unfair contractual terms last year by BMW and Toyota.

By Kwack Jung-soo, business correspondent

Please direct questions or comments to [english@hani.co.kr]