Ahead of 'Exclusive Obligation to One Capital Company'... Concerns Over Impact on Small and Medium Firms

Enforcement of the Financial Consumer Protection Act in March Next Year

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[Asia Economy Reporter Ki Ha-young] Ahead of the introduction of the Financial Consumer Protection Act (FCPA) next year, opinions are divided in the capital industry regarding the application of the 'exclusive obligation to one company.' There are concerns that small and medium-sized companies may suffer damage to their business.

According to the financial sector on the 16th, the draft enforcement decree of the FCPA, scheduled to take effect on March 25 next year, is expected to include a provision to strengthen the exclusive obligation to one company in the model regulations for loan solicitors of capital companies. Financial authorities and the credit finance industry are discussing the specific regulatory application methods ahead of the system's implementation.

The exclusive obligation to one company refers to a regulation that requires loan solicitors to sign an agreement with only one financial company and sell only that company's loan products. It was introduced to prevent loan solicitors from recommending products unfavorable to consumers in order to increase commission income. Unlike banks or insurance companies, leasing and installment finance agents and loan brokerage operators, who had not been subject to the exclusive obligation, are now included under the law. The financial authorities plan to grant a two-year grace period for the system to settle.

Auto installment and lease financing mainly involve car dealers acting as loan solicitors. If the regulation is applied, they will not be able to recommend installment or lease products from multiple financial companies and will be limited to recommending products from only one financial company.

In this case, there are concerns that small and medium-sized capital companies may be disadvantaged. Hyundai Capital, the captive company of Hyundai Kia Motors, is expected to benefit. Hyundai Kia Motors accounts for about 70% of the domestic new car market share. If the exclusive obligation is applied, when partnering with Hyundai Kia Motors, only Hyundai Capital's products can be introduced. It is forecasted that KB Capital, which has partnerships with Jaguar, Land Rover, and Korea GM, will maintain market competitiveness.

However, according to the FCPA, online businesses are exempt from the exclusive obligation. Because of this, there is speculation that the offline proportion in loan channels will decrease and business will be strengthened around online channels.

A financial sector official expressed concern, saying, "If the exclusive obligation is applied to the capital industry, small and medium-sized companies that do not have partnerships with sellers may find it more difficult to operate," adding, "There may also be restrictions on consumer choice."

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