Concerns Over Impact on Small and Medium Capital Firms Ahead of 'Exclusive Obligation to One Company' Implementation (Comprehensive)

Enforcement of the Financial Consumer Protection Act in March Next Year

[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 be implemented from 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 disadvantageous products to consumers in order to increase their commission income. Unlike banks or insurance companies, leasing/installment finance agents and loan brokerage operators, who have not been subject to the exclusive obligation until now, are included in the scope of the law. The financial authorities plan to grant a two-year grace period for the system to settle.

Auto installment and lease finance 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 only be able to recommend products from one financial company.

Small and Medium-Sized Capital Companies May Be Disadvantaged Due to Lack of Partnerships with Sellers

In this case, there are concerns that small and medium-sized capital companies may be disadvantaged. On the other hand, Hyundai Capital, a 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, only Hyundai Capital's products can be introduced when partnering with Hyundai Kia Motors. The industry expects that only KB Capital, which has partnerships with Jaguar Land Rover, Korea GM, and others, will maintain market competitiveness.

However, according to the FCPA, online businesses are not subject to the exclusive obligation. Financial authorities explained that in the case of online, the cost of finding and comparing various companies is low, and automatic transactions occur, so the risk of conflicts of interest due to unfair solicitation is low. For this reason, there is also speculation that the offline share in loan channels will decrease and business will be strengthened around online.

A financial sector official expressed concern, saying, "If the exclusive obligation to one company is applied to the capital industry, it may become more difficult for small and medium-sized companies without partnerships with sellers to operate," adding, "Consumer choice may also be restricted."

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