Concerns and Backlash from Financial Sector over Proposal to Restrict Litigation Rights in 8 out of 10 Amendment Cases (Comprehensive)

Legislative Drive Initiated by Lawmaker Lee Yong-woo of the Democratic Party
Discussion Accelerates as Financial Supervisory Service Chief Shows Strong Commitment

[Asia Economy Reporter Kim Hyo-jin] As the ruling party is actively pushing for a measure to grant consumer-centered one-sided binding force to dispute mediation by financial supervisory authorities, the financial sector is expressing strong opposition.

The core of the proposal is that for dispute mediation cases below a certain scale, if the consumer accepts the mediation proposal, it will take effect regardless of the financial company's consent.

If legislation proceeds as currently trending, it is expected that in 8 out of 10 dispute mediation cases, financial companies will lose their right to file lawsuits. Although this may infringe on the constitutionally guaranteed 'right to a trial' and could be deemed unconstitutional, given the composition of the 21st National Assembly and the determination of the financial supervisory authorities, the likelihood of realization is high, raising concerns within the financial sector.

According to the financial and political sectors on the 13th, Rep. Lee Yong-woo of the Democratic Party, a member of the National Assembly's Political Affairs Committee, introduced a bill to amend the Financial Consumer Protection Act containing these provisions the day before.

The amendment stipulates that "in the case of small-amount dispute cases, if the consumer accepts the Financial Supervisory Service's mediation proposal, it shall have the same effect as a judicial settlement regardless of the financial company's acceptance, and the financial company cannot file a lawsuit."

"Automatically Enforced Upon Consumer Acceptance"
Granting Same Effect as Judicial Settlement

Rep. Lee explained, "Recently, financial companies often refuse to accept the Financial Supervisory Service's Dispute Mediation Committee's proposals, wasting time or even filing lawsuits, which has led to criticism that the effectiveness of the committee's recommendations is diminished," adding, "The purpose is to enhance the effectiveness of mediation and provide stronger protection for financial consumers' rights."

Yoon Seok-heon, Governor of the Financial Supervisory Service, instructed at the executive meeting on the 11th, "Actively work to establish measures to secure the effectiveness of the dispute mediation system by granting one-sided binding force."

Governor Yoon also urged efforts to improve related systems to foster a culture prioritizing customer interests, including strengthening supervision and inspection of unsound business practices.

Following Governor Yoon's remarks, the bill was introduced, rapidly accelerating discussions.

If the amendment is passed, procedures to set detailed criteria for "small-amount cases" through subordinate regulations will proceed. Rep. Lee and the Financial Supervisory Service are strongly considering defining mediation cases under 20 million KRW as small-amount cases based on current civil litigation regulations.

Rep. Lee has identified that about 78% of the Financial Supervisory Service's dispute mediation cases involve dispute amounts of 20 million KRW or less. Although considered small amounts, excluding some fund-related cases with particularly large dispute amounts, the majority of cases would restrict financial companies' litigation rights.

Financial Companies Lose Litigation Rights in About 80% of Cases
"One-sided Restriction of Dispute Rights Raises Concerns"

The Financial Supervisory Service's dispute mediation proposals tend to be more favorable to consumers compared to lawsuits. Moreover, ordinary consumers often find it difficult to match the financial companies' litigation capabilities, so they usually approach the Financial Supervisory Service first.

The one-sided binding force proposal was previously discussed during the enactment of the Financial Consumer Protection Act but was not adopted due to concerns over unconstitutionality. However, supported by the current government's financial policy focus on consumer protection, discussions are progressing rapidly.

The fact that some advanced financial countries overseas have already implemented such systems also serves as a basis for the discussion.

The financial sector strongly opposes this movement. Concerns are particularly high in the insurance industry, which has relatively many dispute cases. A representative from an insurance company stated, "This is an attempt to unilaterally restrict the legitimate right to dispute," and argued, "Granting the Financial Supervisory Service's decisions the same legal meaning as a trial through legislation, despite it not being a government agency, is a very dangerous idea."

A financial sector official pointed out, "Pressure on financial companies is already intense due to dividend restrictions justified by enhancing loss absorption capacity, policies to strengthen internal controls, and reinforced supervisory functions regarding financial product sales," adding, "It seems that excessive distrust toward financial companies and financial capital is being institutionally expressed."

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