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[wylies99]

Consumers Negative on Mutual Aid Firms
http://www.koreatimes.co.kr/www/news/nation/2009/02/117_38958.html

By Bae Ji-sook
Staff Reporter

Ahn Nam-soo, an office worker, joined a ``mutual aid company'' in November 2006 by depositing 2.2 million won ($1,630) as guarantee money to cover future funeral or wedding service costs for his family. Ahn did so after seeing a TV commercial promising full services for these big events, including catering and greeting guests.

However, a year later after he decided he did not need such services and asked for his money back, the company turned cold returning only 1.2 million won, saying the rest had been paid to his agent as a bonus.

Members of such mutual aid companies pay in monthly installments or lump sums for assistance in paying for weddings and funerals. The companies have recently mushroomed on growing demand, as salaried workers and nuclear families are finding it more difficult to pay for such services on their own.

By paying 20,000-50,000 won monthly, a member does not need to worry about how to pay for a funeral, the commercials say. ``Do not ask or think how, just join'' one commercial said.

Such services started in 1982, and grew to 400 companies nationwide with a membership hitting three million.

``The service was a ray of light to people anxious about something they must face _ death and all its rituals and associated costs'' Kim Jeong-hyeon of the Korea Consumer Agency said.

However, more and more members are claiming damages ― complaints and consultations linked to mutual aid services doubled to nearly 1,374 in 2008.

Canceling contracts is difficult, as most companies are reluctant to refund payments. In addition some members said they tried to sell other items during funeral services or did not provide the services that were promised.

Another salaried person, who identified himself as a Kim, joined a service to prepare for his wedding. But after a three-year membership and paying millions of won, the company refused to cover the costs for the ceremony because it was not held at the location the company designated, forcing him to change the venue for his marriage.

Many of the companies are financially, unstable as only 50 million won is necessary to establish them and they're not subject to financial regulation.

They mobilize celebrities for marketing, giving the false impression that these firms are reliable.

The Fair Trade Commission (FTC) has penalized six companies for false advertising and listed the mutual aid industry for close monitoring to protect consumers. It has also activated a team to crack down on unfair and misleading practices.

The industry has also kicked off a drive to win consumers' trust. Jeong Myeong-geun, a spokesman, vowed to root out illegalities or irregularities in the industry in a public hearing conducted by the FTC.

``The business was intended to help others, such as our own family members. There's been some trial and error but we'll sort it out,'' he said.

The governing Grand National Party has already submitted a bill to the National Assembly to regulate the mutual aid industry.

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[wylies99]

If it sounds too good to be true, it probably is. This has scam written all over it.