Too Heavy Penalty for the Contract Cancellation of Water Purifier Rental Service

As the number of people increases who use water purifier rental service thanks to no burden on initial purchasing costs and convenience, so does the number of consumer complaints over the rental service.

In 2007, 705 complaints related to the water purifier rental service have been reported to the Korea Consumer Agency (KCA), up 4.8% from 673 year on year. Among the reasons behind the complaints, heavy contract cancellation fees accounted for the biggest proportion of 23.8%, followed by poor after-sales service (21.1%), and water contamination and quality problem (16.3%).

The KCA reported this result based on its analysis of 705 consumer counsels related to water purifier rental service reported from January to June this year, and said that the government should urgently reform the related standard terms & conditions and adjust the rate of penalty amount in the case of contract cancellation.       

□ “Contract Termination or Cancellation-related Problems” were No. 1 Reasons behind Consumer Complaints

From January to June, 2007, the number of consumer complaints reported to the KCA regarding water purifier rental service was 705, up 4.8% from 673 year on year. The number of complaints reported during the whole year of 2006 was 1,624, which increased 14.4% from 1,420 in 2005. Relevant consumer damages by type of damage and by corporation are as follows.

Types of Consumer Damages related to Water Purifier Rental Service
(Unit: Cases (%))

Type of Consumer Damages by Corporation
(Unit: Cases (%))

□ Cancellation Fees Tend to Be Excessive and Need to be Adjusted
As consumers complained frequently about the excessive cancellation fees for the rental service, relevant regulations on dispute resolution or standard terms and conditions need to be reformed so that consumers can cancel the contract rather easily by paying reasonable amount of penalty charge.

Currently, the Article 10 of the “Standard Terms & Conditions for Water Purifier Rental Service” states that service providers can charge consumers whatever amount is smaller between 50% of rental fees for the remaining period and 10% of the total rental fees for the whole contract period, in case the mandatory usage period is less than 1 year.    

Under the standard terms and conditions, most service operators charge 50% of the rental fees for the remaining contract period, which is often excessively high and needs to be adjusted.

□ Relevant Regulations on Dispute Resolution Necessary for the Frequently Raised Complaints

Other complaints related to water purifier rental service include poor after-sales service such as filter replacement, water contamination and quality problems, and demand for undue charge or fee payment. Despite an increasing number of consumer complaints, currently there is no compensation criteria regarding the rental service, and therefore, proper measures need to be come up with.   

Based on the survey result, the KCA is planning to recommend water purifier manufacturers and rental service providers to establish more thorough product quality management and efficient after-sales service system. In addition, the Agency will prepare detailed compensation criteria by each type of damage and include it into the Regulations on Consumer Dispute Resolution, and ask the Ministry of Finance & Economy and the Korea Fair Trade Commission to reform the existing standard terms and conditions especially on contract cancellation fees and advance notification of payment overdue for consumers.

 Oct 5, 2007 [Consumer Dispute Settlement Department I]