Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Reporter's Notebook Financial watchdogs urged to modify customer protection regulation
Financial Services Commission Chairman Eun Sung-soo speaks during the opening ceremony of Korea Fintech Week 2021 in Seoul, Wednesday. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The nation's financial watchdogs are being urged to modify an ineffective set of regulations in the name of protecting the rights of customers.
The Financial Customer Protection Act took effect on March 25, as part of a step to protect customers from any possible risks of investing in risky financial products.
The purpose of the act looks persuasive at this time when most local banks and financial firms have been mired in a nationwide scandal over the mis-selling of certain derivatives and other risk-laden financial products, without having warned customers properly about their inherent risks.
Following the implementation of the act, however, there has been more confusion in the market, with both customers and financial firms expressing discontent and discomfort over what is widely being considered as a rash introduction of the law.
After the law took effect, sales officials from banks and other financial firms must now read every single detail of their fund products before selling them to customers. Watchdogs argued that this measure was aimed at helping inform customers about financial products before signing onto them. But most customers consider the process too time-consuming and redundant.
From the viewpoint of financial firms, the act also comes as a burden, as it was introduced before detailed regulatory guidelines were finalized. Without such specific regulatory guidelines, officials from the industry have expressed repeated discomfort in recent months over how to respond to customers' inquiries within the new legal boundaries.
“Even if the introduction of the act is a step in the right direction, it still leaves much to be desired, due to the act's paper-based approach,” a financial industry source said.
Despite the complaints, it is known that financial watchdogs and the National Assembly are now discussing revising the act in a way to shift more responsibility onto financial firms, in case of their possible involvement in the mis-selling of financial products, forcing them to pay triple the usual punitive compensation.
Concerns are also growing that a number of customers could abuse the act, which has allowed customers to receive loans and cancel them in less than two weeks without paying any commission.
In the two months since the act took effect, customers have exercised the right to temporarily borrow money worth 66.5 billion won ($59 million) from banks and returned it for free. This amount is nearly triple from the amount borrowed in the period between Jan. 25 and March 24, which came right before the introduction of the act.
Data also show that many customers are being disadvantaged by the enhanced financial law. According to the Korea Federation of Banks, a total of 582 public complaints were submitted to the Financial Supervisory Service and financial firms during the first quarter of 2021, up by 1.75 percent from the previous year. The complaint figure had been on a steady decline throughout last year.