The Prepaid Installment (선불할부거래) license is an essential business license in Korea, designed to regulate businesses that offer goods or services under prepaid installment contracts. Below is a concise explanation of what it covers and who needs it.
What are prepaid installments?
A prepaid installment transaction occurs when a consumer pays for goods or services in two or more installments over at least two months, and the goods or services are delivered after full or partial payment under a prepaid installment contract.
Which businesses require a prepaid installment license?
In Korea, businesses offering goods or services under prepaid installment contracts must obtain this license through official registration with the Fair Trade Commission. Only companies with a minimum capital of 1.5 billion KRW are eligible.
However, the law generally does not apply to products or services outside the categories of funerals, weddings, travel, and family rites, nor to transactions in which a business operator receives goods or services for commercial activities. Additionally, goods or services with a fixed provision date are excluded.
What does the prepaid installment license indicate about the business?
Holding a prepaid installment license generally indicates that a company is legally authorized to operate prepaid installment transactions within the relevant industries.
These companies must submit an auditor-prepared audit report to the Fair Trade Commission within three months of the end of each fiscal year, making this license subject to stricter regulations than licenses such as mail-order licenses.
Additionally, the license signals consumer protection, as businesses are required to secure advance payments from consumers through contracts, limited to no more than 50% of the total amount paid.
Coverage in KOBDi: The KOBDi database includes all businesses registered with a Prepaid Installment (선불할부거래) license. This information appears on each Business Profile page, and companies with this license can be found via the KOBDi Korea Industry Search.