Lotte Card, Toss Bank, Hana Capital rated 'poor' in consumer protection

Toss Bank headquarters in Gangnam, Seoul / Yonhap

Lotte Card, Toss Bank and Hana Capital were ranked “poor” in consumer protection, reflecting weaknesses in internal controls, rising consumer losses and a spike in complaints over the past year, according to the country’s financial watchdog Thursday.

The findings come as the government intensifies oversight of financial service providers over their sales practices and internal controls following a series of financial incidents and consumer disputes.

Institutions rated “poor” are required to submit improvement plans and may face additional management-level meetings with regulators.

According to the Financial Supervisory Service (FSS), the companies were among eight that received the low rating in this year’s financial consumer protection assessment.

The annual assessment measures how effectively financial institutions protect consumers, manage complaints and operate internal controls. The results are used by the FSS to guide follow-up inspections and corrective actions.

Hana Capital’s low rating reflected a sharp rise in complaints and a large-scale factoring-related financial incident during aggressive business expansion in 2022 and 2023.

Factoring is a form of financing in which a company sells its accounts receivable, meaning money it is owed by customers, to a financial institution at a discount in exchange for immediate cash.

The business practice exposed weaknesses in complaint handling and internal controls, the FSS said, pointing to limitations in the firm’s consumer protection, including overlapping executive roles that undermined accountability.

Toss Bank was assessed for the first time. Its poor ranking was due to a surge in complaints linked to delays in overseas debit card transaction cancellations.

The regulator also said the internet-only lender scored poorly due to concerns over whether consumer protection staffing was adequate, the effectiveness of product pre-consultation system functions and whether consumer protection factors were sufficiently reflected in employee performance evaluations.

Lotte Card was downgraded after the watchdog factored in concerns over issues related to consumer harm and data protection.

The FSS will require those rated “poor” to submit corrective action plans and will monitor their implementation. It will arrange meetings with senior executives if necessary.