FTC and FSS cooperate to stem unfair financial contract terms, conditions on consumers

The Fair Trade Commission located in Sejong administrative city / Yonhap

Financial regulators team up to pressure firms to improve internal control efforts

By Anna J. Park

The Fair Trade Commission (FTC) and the Financial Supervisory Service (FSS) have decided to expand their partnership in supervising the internal control initiatives and contractual terms and conditions financial firms apply to their consumers through their products.

The deepened cooperation between the two supervisory agencies is expected to lead to a higher level of evaluation expertise, further pressuring financial firms to come up with reasonable and fair contractual policies on products.

The two authorities jointly hosted a meeting on Thursday afternoon, with 12 financial companies. They included the six major commercial banks ― KB Kookmin, Hana, Shinhan, Woori, NongHyup and IBK ― four credit card firms and two savings banks. Four key financial industry associations, including the Korea Federation of Banks, the Korea Financial Investment Association, the Credit Finance Association and the Korea Federation of Savings Banks, also attended the meeting.

During the meeting, the two regulatory authorities called on financial companies to pay close attention in order to prevent and modify unfair contractual terms imposed on financial consumers. The authorities also highlighted repeated cases of unfair terms and conditions, urging them to avoid committing similar violations.

Through the meeting, the agencies hope to raise understanding among financial firms about how the government's review process works, inducing firms to improve their internal controls as well. The FSS said the deepened partnership with the FTC would also facilitate the enhanced protection of consumers.

In addition, the two agencies plan to strengthen direct communication with financial companies so that their review process can be conducted in a more transparent and speedy manner, aiming to support firms that launch innovative new products.

Under the current legal system, the FTC oversees any commercial products' terms and conditions regarding all industry sectors, while the FSS focuses only on reviewing financial products' contractual terms. When a financial company reports its new products' terms and conditions to the FSS, the watchdog agency assesses the contractual terms first and then sends them to the FTC for final evaluation. When the FTC raises issues concerning the terms and conditions of financial products, the FSS orders financial companies to make corrections to the contractual terms.