In a case where Gap corporation, which issued and distributed prepaid card T-moneoney Card (hereinafter referred to as "T-mone Card"), provides that "the amount stored at the time of loss or theft of a customer's money or the card value may not be paid," and Eul corporation established for the purpose of promoting consumer's rights and benefits, sought suspension on the ground that the customer's name, card number, etc. of the card holder's name is against Article 10 (1) of the Electronic Financial Transactions Act, not giving a refund of the balance when the credit card is lost or stolen, the case holding that Eul corporation's claim is groundless, on the grounds that Article 10 (1) (proviso) of the Electronic Financial Transactions Act is applied to the registered T-mone Card, and that the above terms and conditions violate the Act on the Regulation of Terms and Conditions, and thus, Eul corporation's claim is not reasonable.

The case holding that Article 10 (1) of the Electronic Financial Transactions Act shall apply to the terms and conditions of the prepaid card, which provides that "the amount stored at the time of loss or theft of the card or the card value may not be paid to the customer." However, in case where Eul incorporated for the purpose of promoting consumer's rights and interests, which does not refund the balance of the card in case of loss or theft to the card registered with the name and card number of the card holder in order for the customer to receive income deduction or discount of traffic fees, it does not lose its character as an electronic prepayment means, and thus, Article 10 (1) of the Electronic Financial Transactions Act shall not apply to the electronic prepayment means registered by the nominal owner to suspend it on the ground that it violates Article 10 (1) of the Electronic Financial Transactions Act because it does not lose its character as an electronic prepayment means, and the above terms and conditions itself cannot be deemed as "the exclusion of the customer's right to cancel or terminate the contract, or restrict the exercise of the customer's right to cancel it against the principle of good faith," and it cannot be deemed as unlawful for the seller's loss of the card.

Article 2 Subparag. 14, Articles 6(2), 10, and 18(2) of the Electronic Financial Transactions Act; Article 9 of the Enforcement Decree of the Electronic Financial Transactions Act; Article 6 and Article 9 of the Regulation of Standardized Contracts Act

Korea Consumer Federation (Law Firm Vindication, Attorney Kim Nam-han, Counsel for defendant-appellant)

Korea Smart Card Co., Ltd. (Law Firm Spare, Attorneys Kim -jin, Counsel for defendant-appellant)

June 29, 2017

1. The plaintiff's claim is dismissed.

2. The costs of lawsuit shall be borne by the Plaintiff.

The defendant will discontinue the act of refusing to refund the amount stored at the time of loss or theft of the registered customer's money card, and interfering with the receipt of the report on the loss of the customer.

1. Facts of recognition;

A. The Plaintiff is a non-profit non-profit private organization established pursuant to Article 29 of the Framework Act on Consumers for the purpose of promoting consumers’ rights and interests. The Defendant is a company that mainly engages in all activities related to the transportation card system, including electronic prepayment means and management business, and electronic payment settlement agency business

B. The Defendant issues and distributes a prepaid card T-moneoneone (hereinafter “T-mone Card”), and the customer who purchased the T-mone Card may pay the transportation fee or pay the price at the franchise store by using it.

C. In principle, Esat cards are issued in bearer names. However, in cases where the customer registers personal information and card numbers, such as the name of the user of the relevant Tsat cards, on the Defendant’s website to receive income deduction under tax laws on the amount of money cards, or where the child or juvenile registers personal information and card numbers on the Defendant’s server to receive traffic fare discounts, the Defendant Company stored the personal information and card numbers of the customer registered as above on the Defendant’s server.

D. Article 7(2) of the Defendant’s Telecommunication Terms and Conditions (hereinafter “instant Terms and Conditions”) provides that “The amount stored at the time of loss or theft of the card by a customer and the card value shall not be caused. However, in the case of a specific card product that refunds the amount of standard separately determined by the company, it shall be at the risk of based on publicly notified service guidance data.” Accordingly, the Defendant does not accept a report on the loss of the card’s name and card number, etc. in cases where the customer lost or stolen the card in order to income deduction or to receive a transport fee, as seen below, except where the customer joined the mobile machine loss, theft, and awareness service, or where the customer joined the public transport security card service, he/she did not receive the report on the loss of the card itself on the ground that it is impossible to refund the amount stored on the relevant card.

E. Meanwhile, the Defendant only has the function of transportation card and sells “the public transportation core card”, which is a pre-paid card, which can be refunded to the balance if the customer files a report on the card division. The Defendant also provides lost and stolen safe service to the customer who uses the relevant mobile phone as well as the general telecommunication card by installing the financial USIM which can be used by the mobile phone.

[Reasons for Recognition] Facts without dispute, entry in Gap evidence 1 through 4 (including branch numbers, hereinafter the same shall apply) and the purport of the whole pleadings

2. Relevant statutes;

The entries in the attached statutes are as follows.

3. The plaintiff's assertion

A. Since the card’s card’s personal information and card number registration is no longer an “registered electronic prepayment means” but rather an “registered electronic prepayment means”, the proviso of Article 10(1) of the Electronic Financial Transactions Act does not apply to the card’s registered electronic prepayment means. Therefore, the Defendant’s failure to refund the balance when the card was lost or stolen violates the main sentence of Article 10(1) of the same Act.

B. The proviso of Article 10(1) of the Electronic Financial Transactions Act, which limits the consumer’s right of rescission, is contrary to Article 6 or 9 of the Regulation of Standardized Contracts Act, and is ineffective or restricted pursuant to Article 10(2) of the Electronic Financial Transactions Act. Therefore, the failure of the Defendant to refund the balance of the lost or stolen card against the main sentence of Article 10(1) of the Electronic Financial Transactions Act.

C. As above, the Defendant’s act of not refunding the balance at the time of loss or theft of the card is unlawful and thus refusing to receive a report of loss is also unlawful. This is contrary to Articles 20(4) and 12(2) of the Framework Act on Consumers, and Article 6 subparag. 1 of the Notice of Designation of Unfair Consumer Transactions by the Fair Trade Commission, and thus, the Plaintiff may seek to suspend it against the Defendant pursuant to Article 70 of the Framework Act on Consumers.

4. Determination

A. Whether the proviso of Article 10(1) of the Electronic Financial Transactions Act applies to a registered e-mail card

1) As seen earlier, the fact that the Defendant holds personal information of the owner of the relevant card upon the registration of the card is recognized. According to the evidence No. 8, it is recognized that the Financial Supervisory Service distributed news report materials to the effect that, at the time of loss or theft of a bearer pre-paid card on November 17, 2016, the Financial Supervisory Service decided to reissue the relevant card to the customer and allow refund.

2) However, in light of the following circumstances, the proviso of Article 10(1) of the Electronic Financial Transactions Act ought to be applied inasmuch as an electronic prepayment means registered by the nominal owner does not lose its nature as an electronic prepayment means. Accordingly, the Plaintiff’s assertion on this part is without merit.

A) Article 2 Subparag. 14 of the Electronic Financial Transactions Act provides that an electronic prepayment means may be transferred without going through the central computer system of the issuer in cases of an electronic prepayment means for which real name is not verified, and it may be transferred in a more simple manner, regardless of whether the nominal owner is verifiable. Meanwhile, Article 10(1) of the same Act and Article 9 of the Enforcement Decree of the same Act provide that an electronic prepayment means may be exempted from liability due to the loss or theft, etc. of the electronic prepayment means in a certain case, and that an electronic financial business entity may not be identified as the nominal owner, etc.

B) The proviso of Article 10(1) of the Electronic Financial Transactions Act and Article 9 of the Enforcement Decree of the same Act are relatively small in the case of an electronic prepayment means, and when an employer has charged a certain amount in advance, the means of access (credit card) itself has the function as an electronic certificate indicating the value equivalent to the stored amount, and the electronic financial business operator is prohibited from taking approval procedures for each individual transaction, such as a credit card, even if an electronic financial business operator receives a report of loss or theft, taking into account the fact that the electronic financial business operator is unable to take measures, such as suspension of transaction, even if he/she receives a report of loss or theft, so that the loss or theft of the electronic prepayment means can be

Even if a user of an electronic prepayment means registers his/her personal information and card number, the transaction amount is small, i.e., the means of access itself has the function as an electronic certificate, and the electronic financial business operator is unable to take measures, such as suspension of transaction, even if he/she receives a report of loss or theft, because the means of access does not have the function as an electronic certificate for the purpose of simple and prompt use. The same applies

C) It appears that the standard terms and conditions established by the Financial Supervisory Service as seen earlier are not based on the interpretation of the Electronic Financial Transactions Act, and the Financial Supervisory Service’s report materials include “re-issuance without judgment of nullification even to the reporter who registered the use.” Therefore, it is difficult to view that the standard terms and conditions are subject to the Tact Card.

B. Whether the Regulation of Standardized Contracts Act was violated

1) The Plaintiff’s assertion to the effect that the Act on the Regulation of Terms and Conditions may be declared null and void pursuant to the Act on the Regulation of Terms and Conditions, but the Act on the Regulation of Terms and Conditions cannot be deemed null and void. Moreover, the proviso of Article 10(2) of the Electronic Financial Transactions Act does not purport to invalidate the same itself, and thus, the proviso of Article 10(1) of the Electronic Financial Transactions Act is invalid.

However, if Article 7(2) of the Terms and Conditions of this case becomes null and void in violation of the Act on the Regulation of Terms and Conditions, the Defendant’s refusal of refund in the event of loss or theft of the e-mail card registered by the Defendant cannot be subject to the proviso of Article 10(1) of the Electronic Financial Transactions Act, and thereby, it is unlawful in accordance with the main sentence of Article 10(1). Accordingly, this part of the Plaintiff’s assertion is examined as to whether Article 7(2) of the Terms

2) Whether Article 9 of the Regulation of Standardized Contracts Act is violated

The Defendant did not return the amount and value of the card already stored in the card when the customer lost or stolen the card pursuant to Article 7(2) of the Terms and Conditions of this case, and did not receive the report itself on the loss or theft of the card. As a result, the Defendant’s right to cancel or terminate the card’s use contract is limited in relation to the loss or theft of the card. However, Article 7(2) of the Terms and Conditions of this case cannot be deemed to be “a provision to exclude or restrict the right of the customer to cancel or terminate the contract in accordance with the Act,” and thus, the Plaintiff’s assertion is without merit.

3) Whether Article 6 of the Regulation of Standardized Contracts Act is violated

A) Relevant legal principles

Article 6(1) and (2)1 of the Regulation of Terms and Conditions Act that are unreasonably unfavorable to customers pursuant to Article 6(1) and (2)1 of the Act on the Regulation of Terms and Conditions, to be deemed null and void on the ground that “a clause which loses fairness contrary to the principle of trust and good faith” is somewhat unfavorable to customers. It is insufficient to view that the standardized contract clause was somewhat unfavorable to the customers. It should be recognized that the standardized contract clause’s preparing and using the standardized contract clause that violates the principle of trust and good faith against the legitimate interests and reasonable expectations of the contracting parties, thereby impairing the sound trade order. In addition, whether the standardized contract clause constitutes “a clause which is unreasonably unfavorable to the customers” that constitutes grounds for invalidation of the standardized contract clause should be determined by comprehensively taking into account all the circumstances such as the content and probability of disadvantages that may arise to the customers pursuant to the standardized contract clause, impact on the transaction process between the parties, and the relevant provisions of relevant Acts and subordinate statutes (see, e.g., Supreme Court Decision 20

B) Determination

(1) According to the following facts or circumstances, each entry in the evidence Nos. 4, 6, 10, and 13, which can be recognized by adding the whole purport of the pleadings, the Defendant’s registered Mather Card to the entire purport of the pleadings, it is necessary to take measures to stop settlement when the Defendant received a report of the loss or theft from his customer and to establish a system to protect the card holder and prevent double payment. This seems to be excessive compared to the Defendant’s profits derived from the issuance and distribution of Mather Card.

(A) Since the machine’s card device reads the information recorded on the contact card, and then makes a settlement by immediately deducting the settlement amount from the charge amount of the relevant card, and does not take a separate procedure for real-time communication. Thus, even if the lost or stolen information on the card is entered into the Defendant’s server, it cannot be taken measures, such as real-time confirmation of it from the device and restriction on settlement.

(B) Therefore, in order to prevent the settlement by the lost or stolen card, a separate computer system should be established to confirm the loss or theft information of the cards located on the Defendant’s server through real-time communication, as in the case of credit cards, on all settlement terminals using the e-mail card. However, since the current number of member stores, such as convenience stores and restaurants, which are registered to enable the use of the e-mail card, exceeds approximately 140,000,000, the above separate computer system should be provided to all the above member stores (the Defendant asserts that the aforementioned separate computer system bears the burden of KRW 160,000,000,000).

(C) Profits earned by the Defendant from the commission fees of Tatn Card appear to be from KRW 130,00 to KRW 170,000 each year. However, considering the Defendant’s partial profits from the charging amount of Tatn Card not used for the reason of theft, loss, etc., the aforementioned expenses incurred in the construction of the aforementioned system are excessively excessive compared to the Defendant’s operating profits.

(2) The Defendant provides a service that can get a refund of the balance of the card when the card is stolen or lost. However, when the card user reports the loss or theft of the card, the public transportation core card is input of the relevant card in the settlement terminal after the operation of bus, subway, etc., and thereafter the said device provides a refund of the balance of the card pursuant to the principle that it may refuse payment using the lost or stolen card, and only provides the aforementioned service using the public transportation settlement system, and does not protect the card holder through the real-time transaction approval procedure as seen earlier. Moreover, in the case of mobile machine, the mobile machine can be banned from using the mobile phone using the mobile phone through the financial USM card installed in the mobile phone, and thus, it does not immediately protect the owner of the card through the Defendant’s real-time transaction approval procedure. Accordingly, the Defendant does not immediately provide any other service.

(3) It is desirable for the Defendant to guarantee the refund of the balance to the lost or stolen e-mail card in light of the fact that the Defendant enjoys an exclusive status with respect to the means of payment of public transportation charges and that the number of customers with the e-mail card is large (the e-mail card is widely used among children and juveniles). However, the enormous cost incurred in installing such system is bound to be transferred to the card users, and thus, the restriction on the refund of the balance of the card cannot be deemed to be disadvantageous to all customers.

(4) In principle, the Electronic Financial Transactions Act provides that a financial company or an electronic financial business entity may be exempted from liability for any customer’s loss or theft of the means of access in certain cases, taking into account the transaction circumstances, while ensuring that the financial company or electronic financial business entity is liable to compensate for the loss or theft of the means of access. In evaluating the terms and conditions of the instant

(5) The Defendant’s failure to provide the balance refund service of the lost or stolen Telecommunication Card is ultimately due to the payment method of the Telecommunication Card. Since Telecommunication Card was designed for the purpose of making payment more prompt and convenient than the original other means of access and its device was designed and distributed in compliance with such purpose, the Defendant may not criticize the Defendant that it does not change the payment method of the Telecommunication Card in the same way as other means of access. On the other hand, even though the scope or method of use is limited, the customer may prevent the risk of loss or theft by using the public transportation security card or mobile Telecommunication System provided by the Defendant.

(6) Of the contents of newspaper articles presented by the Plaintiff (the purport that the charge amount of transportation cards not used for the last five years in the inspection of the state is to be raised at KRW 65 billion), the unused amount of 65 billion includes not only the charge amount of the lost and stolen card, but also the charge amount of the card of foreign travelers or customers who have not used the card merely. The contents of the article also include the unused amount of the Defendant’s non-used amount of at least 1.8 billion won to a maximum of 2.1 billion won. Thus, it also include the unused amount of the Defendant’s non-used amount of the company. In the meantime, the Defendant contributed part of the charge amount that was not used for five years to the Public Interest Foundation.

(7) Comprehensively taking account of the aforementioned various circumstances, the evidence alone submitted by the Plaintiff cannot be deemed null and void because Article 7(2) of the Terms and Conditions of this case constitutes “a clause which has lost fairness against the principle of trust and good faith,” which is an unreasonably unfavorable provision against the customer. There is no other evidence to support this otherwise. Accordingly, the Plaintiff’s assertion on this part is without merit.

5. Conclusion

Thus, the plaintiff's claim is dismissed as it is without merit.

[Attachment] Relevant Statutes: omitted

Judges Lee Jae-ho (Presiding Judge)