Mistaken transactions made through mobile payment apps will be subject to aid from a state-run deposit insurer after a revision of a depositor protection legislation takes effect later this year.
Starting on July 6, the Korea Deposit Insurance Corporation will help reverse error remittances that have occurred not only in accounts of financial institutions but also in mobile payment services such as Toss and Kakao Pay, according to amendments to the Depositor Protection Act.
However, transactions that are made via a mobile phone number or social media without knowing the name or identification number of the receiver will have limited assistance.
Korea Deposit Insurance Corporation (Yonhap)
The KDIC’s new rescue scheme is expected to help resolving an increasing number of disputes over erroneous transactions. Currently, financial institutions have no right to order a refund in wrongful retention of the money and have to rely on the receiver’s decision or a lawsuit which could take as long as six months.
From 2017 to 2019, the total amount of wrongful remittance stood at 880 billion won ($791 million), including 320 billion won in 2019 alone, with cashless transactions and simple and easy transfer methods taking over the traditional methods of money transfer. But only half of about 158,000 error remittance cases in 2019 were returned.
Once a remitter applies for the wrong fund transfer, KDIC will decide whether or not to process it. If KDIC decides to go ahead, it will first purchase the unjust enrichment bond from the remitter and then obtain recipient information from financial companies, the Ministry of Public Administration and Security, and telecommunications companies. It will guide the recipient to the mistaken remittance and encourage them to return voluntarily. If a voluntary return is not made, the court will apply for a payment order.
By Park Ga-young (firstname.lastname@example.org