Banks face suits over hacking attacks

A customer leaves a Nonghyup Bank branch in Gwangju in this Wednesday photo after the bank’s computer network system was shut down by a cyber attack. Nonghyup and other affected financial firms may face a class action suit by consumers who suffered from damage by the transaction interruption. / Yonhap

By Kim Rahn

Consumer groups plan to file a class-action suit on behalf of clients who suffered damage from Wednesday’s network shutdown at financial companies following a cyber attack.

The Financial Consumer Agency (FCA) and the Korea Finance Consumer Federation said Friday that they have began collecting complaints from customers of the affected firms ― Shinhan, Nonghyup and Jeju banks and Nonghyup’s two insurance arms.

It also plans to mediate between the victims and the companies so that the two sides can come to a compromise and make provision for payment of compensation where damages occurred.

“Otherwise, we will file a class-action suit against the firms,” a FCA spokesman said.

This marks the second time that the groups will be involved in arbitration of disputes caused by cyber attacks. Nonghyup came under attack in 2011 resulting in a three day suspension of almost all transactions.

“At that time, we collected about 200 complaints. And the amount of damages claimed by the victims were not large, with only three cases involving some 10 million won,” Cho Nam-hee, FCA president, said.

“In 2011 we learned that mainly self-employed people suffered damage because they failed to pay contractors by due dates because of the network malfunction at Nonghyup. People might have suffered similar damages from Wednesday’s hacking,” he said.

However, not many people are expected to participate in the collective action, because the network shutdown happened for only two hours and the affected banks extended their operations for hours on the day of the attack. The banks have meanwhile stated that there have so far been no financial damages as a result of the attack.

Nam said, “But some people may have suffered huge damage because they couldn’t make payments at a specific time during the two hours. For example, a person may have been unable to make a house lease contract because he or she failed to pay the deposit by the due date.”

He said such collective action also aims to arouse attention from financial firms to the dangers of cyber attacks and consumer rights.

“Relevant laws stipulate that financial companies are exempt from compensation if they have made effort to prevent such incidents. So, it is not easy for consumers to prove it is the banks’ faults. We need to make companies pay more attention to cyber security,” Nam said.

Kang Hyeong-ku of the Consumer Federation echoed Nam’s view.

“Financial firms have expanded electronic transactions for more efficiency, convenience and profits. More and more consumers also use online transactions as Internet infrastructure is well developed here,” Kang said.

“So the firms are supposed to strengthen online system security, but they haven’t spent enough attention and enough money to improve the system because they have focused only on making profits.”

Kang suggested a joint committee be formed by financial firms, the Korea Internet & Security Agency, the Korea Communications Commission and security companies to establish a safer online transaction system.

“Online financial transaction is very closely linked to majority of people’s everyday life. If the systems are paralyzed, it can cause tremendous damage to the whole country. Online security issues cannot be solved by each financial firm’s own efforts,” said Kang.