The National Policy Committee of the National Assembly approved a Financial Consumer Protection Bill on November 25. As a key policy agenda of the Moon Jae-in administration, this legislation will help enhance the rights of financial consumers and improve the overall public trust in the financial industry.
KEY FEATURES
I. SIX SALES REGULATIONS TO BE APPLIED TO ALL FINANCIAL PRODUCTS
The six major sales regulations currently applied to selected financial products by separate laws, such as the Financial Investment Services and Capital Markets Act, will be applied to all financial products.
II. STRICT PUNISHMENT FOR VIOLATIONS OF SIX SALES REGULATIONS
The new legislation established a legal basis to impose punitive fines for violating the major sales regulations (except ‘the principle of suitability’ and ‘the principle of adequacy’ regulations); integrated divergent penalty criteria currently under different laws into a unitary penalty system; and established a legal basis to impose a penalty of up to KRW30 million for violating the ‘principle of suitability’ and the ‘principle of adequacy’ regulations.
III. PREVENTION OF CONSUMER DAMAGES FROM MISSELLING & EFFECTIVE REMEDIES
A new set of consumer rights and arrangements will be introduced to prevent consumers from falling prey to misselling and other unfair sales practices and provide more effective remedies in the afterwards.
- Consumers will be entitled to the right to withdraw subscription, to terminate contract if it is deemed to be in violation of laws, and to request information for the purpose of dispute resolution or litigation.
- FSC may order a cessation of sales of the relevant products when significant losses are expected to consumers.
- The burden of proof in liability for damage cases remains with the seller.
- Courts may decide to terminate lawsuits arising from unresolved conflict resolution cases.
- Filing a lawsuit against an individual is prohibited until the conflict resolution case is finalized.
IV. ENHANCED ACCESS TO FINANCIAL ADVISORY SERVICES & INVESTMENT INFORMATION
The new legislation provides financial consumers easier access to the information they need.
- A new type of financial advisory service will be launched based on the principle of independency to provide general consumers easier access to professional and unbiased advising services.
- FSC is required to conduct an analysis of public awareness and capability on financial matters and develop financial education policy on a regular basis.
- Financial authorities are able to provide a comparison of interest rates and fees between different financial products as well as the information about the performance of financial institutions regarding consumer protection, in order to help consumers make smart decisions.
SCHEDULE
The new bill on financial consumer protection will be debated in the Legislation & Judiciary Committee and during a plenary session of the National Assembly. The law will become effective one year from the public announcement.
* Please refer to the attached PDF for details.