A complaint filed against Jung Shing International Co., Ltd. for making false advertisement of debt coordination, violated Article 21 and Article 24 of the Fair Trade Law

Chinese Taipei

Case:

Key Words:

False, misleading, debt coordination

Reference:

Fair Trade Commission Decision of April 13, 2006 (the 753rd Commissioners’ Meeting), Disposition (95) Kung Ch’u Tzu No. 095042

Industry:

Other Financing and Auxiliary Financing Not Elsewhere (6299)

Relevant Laws:

Article 21 and Article 24 of the Fair Trade Law

Summary:

1. This case originated from the public’s complaint and the letter of the Financial Supervisory Commission, Executive Yuan (hereinafter referred to as the FSC) indicating that Jung Shing International Co., Ltd. (hereinafter referred to as the respondent) had made following announcements on the website and in the newspaper’s advertisement. The advertisement announced “After paying the debt, the client will be assisted to restore his/her on credit record at Joint Credit Information Center”, “Helping the client to reduce his/her total debt by approximately 30% to 50%”, and publishing “A comparison table of the Bankers Association’s coordination mechanism and OK Jung Shing International’s coordination mechanism”. The aforementioned letters indicated that such announcements and publication might have made false advertisements.
2. With regard to “After paying the debt, the client will be assisted to restore his/her on credit record at Joint Credit Information Center” announced in the advertisement, it is found that the Joint Credit Information Center (hereinafter referred to as JCIC) has separately prescribed an announcement period to disclose the credit fault of each party concerned. Such announcement period is determined according to the seriousness of fault made by the party concerned. After the party concerned has settled the debt, there is no possibility for him or her to either shorten or alter the announcement period of his/her credit record because of the respondent’s assistance. Furthermore, the respondent also did not deny that the on credit record at JCIS must be handled according to the regulations of JCIS after the client paid back the debt. The credit fault will be announced continuously for at least six months after the settlement of debt. The personal credit history recorded by JCIS concerns with the terms of correspondence between an individual with the financial institution and has been valued generally. The credit record at JCIS will continue to be announced for at least six months after the settlement of debt, and there is no possibility at all that the record can be canceled immediately after the settlement of debt. The Bankers Association and the FSC replied in their letters that the aforementioned advertisements and publication indeed were misleading. The advertisements in this case did not state the JCIS on credit information’s announcement period. The representations of the said advertisement will mislead ordinary person into believing that the respondent can assist him/her to restore his/her on credit record at the JCIS after he/she paid back the debt, and thus made erroneous trading decision. Therefore, according to the available evidences, it is deemed that the aforementioned advertisements have made false and misleading representations.
3. With regard to “Helping the client to reduce his/her total debt by approximately 30% to 50%” announced in the advertisement, it is found that the figures stated in the announcement were estimated according to the operating experience of the respondent and the common practices of debt collection companies. The respondent did not have any concrete and objective data prior to this advertisement. Next, it is found that although the respondent has provided the 50.45% average reduction of total debt for clients that have succeeded debt coordination in January and February of 2006 as evidence, however, the respondent has calculated the percentage of total debt reduction differently from the practices of ordinary banks. Therefore, a further examination is needed to ascertain the attainability of the claim of reducing “30% to 50% of total debt”. Maybe there were clients of the respondent reducing their total debt by 30% to 50% as a result coordination, however, in accordance with the banks’ practices, there were not many debtors who can successfully reduce his/her debt by 30% to 50%. In a report presented to the Fair Trade Commission, the Bankers Association expressed that “In practice, the possibility of reducing total debt by approximately 30% to 50% in the debt coordination shall be considered as an exception; it is not a common practice.” The report was enclosed for examination. To sum up, it is insufficient to conclude from the evidences provided by the respondent that most debtors who have commissioned the respondent to handle coordination will achieve the claim of “Helping the client to reduce his/her total debt by approximately 30% to 50%” as printed in the advertisement. Therefore, according to the available evidences, it is deemed that the expression “Helping the client to reduce his/her total debt by approximately 30% to 50%” are false and misleading representations, and thus has violated Article 21, paragraph 1 of the Fair Trade Law, applied mutatis mutandis to paragraph 3.
4. With regard to the publishing of “A comparison table of the Bankers Association’s coordination mechanism and OK Jung Shing International’s coordination mechanism”, the following findings are found:
   1. The subjects of comparison for “A comparison table of the Bankers Association’s coordination mechanism and OK Jung Shing International’s coordination mechanism” were “The Bankers Association’s coordination mechanism” and “OK Jung Shing International’s coordination mechanism”. “The Bankers Association’s coordination mechanism” adopts a free-of-charge collective coordination, which the debtor does not have to pay any fees. Moreover, the debtor can make debt coordination with several creditor banks in the same debt coordination and attain similar terms of debt payment with all creditor banks. However, for the debt coordination provided by the respondent, the respondent was commissioned by its client to carry out the coordination of debt settlement with a creditor bank (including debt collection company). When the client has several creditor banks, the respondent must carry out debt settlement coordination and sign contract individually with each creditor bank. At the time of accepting the commission and after completing the debt coordination, the respondent collected relative membership fee and service charges from the debtor. A comprehensive examination of both debt coordination mechanisms shows that, regardless of the content design, coordination process, coordination subject, and the total of creditor banks that were bound by the result of coordination, they are different. The extra cost of coordination, such as money and time that were needed in debt coordination, was also incommensurate. The advertisement in this case compared both coordination mechanisms directly without making any specific description of their differences. Such act of comparing debt coordination mechanisms of different levels after all was a marketing of one’s debt coordination service. In case of the content of comparison was not objective and unfair, the standard of comparison was not consistent, then the credibility of the advertisement is questionable. In addition to this, the said advertisement also will distort the debtor’s choices of making objective trading decision. Thus, it is likely that the advertisement will deceive the debtor into making erroneous trading decision. Furthermore, the Bankers Association with the supervision of the FSC carries out the collective coordination mechanism, and hence the mechanism is accountable. If the respondent was not objective, fair and true in making comparison to the coordination mechanism of the Bankers Association, then the respondent in virtue of the accountability of “coordination mechanism” carried out by the Bankers Association has strived for the trading opportunity. It is deemed that the respondent has deceptive or obviously unfair conduct that was able to affect trading order.
   2. The additional payment required for the service of debt coordination was important trading information that would be taken into consideration by the respondent in the decision of debt coordination. It is found that at the time of accepting the debtor’s commission, the respondent would collect NT$ 2,000 membership fee for each commissioned debt coordination service. Upon the completion of coordination, the respondent, depending on the types of debt being successfully coordinated, would collect a service charge that ranged from NT$ 2,500 to NT$ 5,000 per case. However, there was no charges for the debt coordination provided by “the Bankers Association’s coordination mechanism”. The advertisement in this case did not announce any information of the said charges for debt coordination, thus causing the debtor unable to make objective decision of choosing the manner of debt coordination that is more favorable to him/her and in consequence would made erroneous trading decision. The respondent has concealed important trading information in the advertisement that there was a charge for the coordination mechanism provided by it whereas that provided by the Bankers Association coordination mechanism was free. The debtors thus were misled into believing that there were charges for both coordination mechanisms, regardless of provided by the Bankers Association or the respondent. Consequently, the respondent would have more chances of being selected by the debtors in their trading decisions. The conduct of the respondent has violated the provision of Article 24 of the Fair Trade Law.
   3. In the comparison table, the “Terms of Coordination” for “OK Jung Shing International’s coordination mechanism” was written as such “In addition to unsecured debt, commission was also accepted for collateralized debt (including house and car loans).” The “Terms of Coordination” for “The Bankers Association’s coordination mechanism” was written as “unsecured debt (including cash card, credit card and unsecured loan).” It is found that the “house loan and car loan” indicated in the aforementioned “In addition to unsecured debt, commission was also accepted for collateralized debt (including house and car loans)” of “OK Jung Shing International’s coordination mechanism”, referred to the debt coordination carried out by the respondent for the balance of debt after the collaterals for bank were auctioned. Next, it is found that the debt handled by “The Bankers Association’s coordination mechanism” also included the debt that could not be paid off due to insufficient amount received from the execution of the property rights of security for the secured loans. Therefore, for the secured loan of “house loan and car loan”, the balance of loan that still could not be paid off after the execution of the real rights of security was still within the scope of debt coordination handled by “The Bankers Association’s coordination mechanism”. The respondent has unilaterally intercepted the scope of debt coordination handled by “The Bankers Association’s coordination mechanism”, thus misled the debtors into believing that the scope of debt coordination provided by the respondent’s “OK Jung Shing International’s coordination mechanism” was broader than that provided by “The Bankers Association’s coordination mechanism”. Therefore, in accordance with the available evidences, it is obvious that the respondent has engaged in deceptive and obviously unfair conduct that is sufficient to affect trading order.
   4. In the comparison table, the “Balance Due” and “Annual Amortization” items for “The Bankers Association’s coordination mechanism” were separately printed with the representations of “NT$ 300,000 and above” and “not less than 15% of total debt”. However, it is found that in the debt coordination of “The Bankers Association’s coordination mechanism”, besides the terms “NT$ 300,000 and above” and “15% or more of total debt”, the qualification of NT$ 300,000 and above for total debt was inapplicable in the case that the debtor is a student. In addition, due to special factors, a loan of interest rate as low as 0% and as long as 10 years can be given to a debtor depending on his or her actual condition. Furthermore, such loan was not subjected to the restriction of not less than 15% of total debt must be paid back each year. The respondent has unilaterally intercepted parts of qualifications and regulations of debt coordination handles by “The Bankers Association’s coordination mechanism”, thus misled students or debtors in special conditions into making erroneous trading decision. Then, the trading opportunity for the respondent would increase. The conduct of the respondent has violated the provision of Article 24 of the Fair Trade Law.
5. Taking into consideration the motivation of the unlawful acts of the respondent; the degree of the act’s harm, circumstances of the unlawful act, scale of the enterprise; and attitude shown for the act, the respondent is ordered to cease the unlawful acts immediately and a fine of NT$ 1,850,000 is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by: Lee, Wan-Chun;
Supervised by: Wu, Lieh-Ling

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