Passage of the Financial Consumer Protection Act in the National Assembly... 9 Years After First Proposal in 2011

[Asia Economy Reporter Kim Hyo-jin] The "Financial Consumer Protection Act (FCPA)," which has attracted attention as a measure to prevent a second "overseas interest rate-linked derivative-linked fund (DLF) and Lime" incident, has passed the National Assembly after about nine years. The core of the FCPA is to expand the application of major sales regulations, which were limited to certain financial products, to all financial products. Although punitive damages were not included, it is highly regarded for significantly strengthening the rights and interests of financial consumers.

On the afternoon of the 5th, the National Assembly held a plenary session and passed the FCPA. After the bill is sent from the National Assembly to the government, it will be promulgated following the Cabinet meeting's resolution. It is expected to take about one month. The law will be enforced one year after the date of promulgation.

The FCPA stipulates that the six major sales conduct principles?suitability, appropriateness, duty of explanation, prohibition of unfair business practices, prohibition of improper solicitation, and advertising regulations?apply to all financial products.

The bill also includes grounds for imposing punitive fines of up to 50% of income if the duty of explanation or prohibition of improper solicitation regulations are violated. A new "right to demand contract termination for illegal contracts" is established, allowing consumers to request the financial company to terminate the contract within a certain period if the company violates sales regulations. The application deadline will be separately determined within a maximum of five years from the contract conclusion.

Punitive damages and class action systems were not included. The punitive damages system requires financial companies to compensate victims with amounts far exceeding actual damages if their illegal acts are malicious or antisocial. The class action system recognizes the effect of a judgment on those who did not participate in the lawsuit but suffered the same damage when some victims file a lawsuit and receive a ruling in disputes between financial companies and consumers.

The issue of shifting the burden of proof for proving the financial company's illegal facts from the victim to the financial company is settled to apply only in cases of intentional or gross negligence in violation of the financial company's duty of explanation.

The FCPA was first proposed in 2011 following the 2008 global financial crisis, with a total of 14 bills introduced, but passage through the National Assembly was repeatedly delayed. It is analyzed that the increased demand for consumer protection due to the large-scale loss incidents of DLF and Lime last year influenced its passage after nine years.

This content was produced with the assistance of AI translation services.