Complaint filed against Far Glory Life Insurance Company for improperly exercising acceleration clause and violating the Fair Trade Law

Chinese Taipei

Case:

Key Words:

Life Insurance, accelerated clause

Reference:

Fair Trade Commission Decision of March 23, 2006 (the 750th Commissioners’ Meeting); Disposition Kung Ch’u Tzu No. 095029

Industry:

Personal Insurance (6410)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated from the complaint filed by Global Opto Technology Corporation (hereinafter referred to as the complainant) against Far Glory Life Insurance (hereinafter referred to as the punished) because the punished refused to provide contract to the complaint. In addition, the punished, based on the reason that the complainant did not pay interests pursuant to the agreement, has abruptly demanded to auction the collateral without prior notification to the complainant. Such conduct has involved a deceptive act of violating the provision of Article 24 of the Fair Trade Law.
2. The Fair Trade Commission’s investigation found that Article 8 and Article 22 of the standard credit facility agreement signed between the punished and the complainant stipulated that when the borrower has any of insufficient credit circumstances specified in Article 8, Paragraph 6 to Paragraph 9, the lender might proceed to exercise the acceleration clause without prior notification to the borrower. It was unquestionable that the lender had exploited the clauses of standard contract to deprive the opportunity for borrower to take remedy actions if they knew the matters beforehand. The clauses were obviously unfair to borrowers in terms of their rights and interests protections. Although the punished argued that the Company has never exercised the clause at issue, but the clauses in an agreement were basis for borrower and lender to exercise their respective rights and obligations. Regardless of the exercise of such clauses, they were binding on the borrower and the punished cannot shirk its responsibility. In addition, even though the punished argued that house loan was not the major business for the Company, however, the punished did not deny the said credit facility agreement was indeed a standard loan contract. Furthermore, there were more than hundreds auctions being completed for overdue loans until now. In conclusion, more than one occasional trading dispute has resulted from the clauses of the credit facility agreement at issue. The said clauses were deceptive acts able to affect trading order. To sum up, the punished has improperly stipulated the exercise of acceleration clause in Article 8 and Article 22 of the credit facility agreement, deprived the opportunity of the borrower to take remedy action beforehand. It is apparent that both parties of the agreement did not have equal rights and interests. Far Glory has exploited the information asymmetry disadvantage of its trading counterparts and engaged in obviously unfair conduct that is able to affect trading order. Such conduct has violated the provision of Article 24 of the Fair Trade Law.
3. Taken into consideration the motivation, purpose and expected improper benefit of the unlawful acts of the punished; the degree and duration of the act’s harm to market order; benefits derived on account of the unlawful act; scale, operating condition, sales volume and market position of the enterprise; whether or not the type of unlawful act involved in the violation has been the subject of correction or warning by the Central Competent Authority; types of, number of, and intervening time between past violations, and the punishment for such violations; remorse shown for the act and attitude of cooperation in the investigation, and other factors, therefore, the punished is ordered to cease the unlawful acts and a fine of NT$ 500,000 is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by Yen, Chia-Lin;
Supervised by Tai, Pei-Yi

Appendix:
Far Glory Life Insurance Co., Ltd.’s Uniform Invoice Number: 84703052