Calls Grow for Improving Effectiveness of Dispute Resolution Committee Ahead of Financial Consumer Protection Act Enforcement

"Need to Ensure Neutrality and Expertise of the Dispute Mediation Committee"

Partial Amendment Bill of the Financial Consumer Protection Act

[Asia Economy Reporter Park Sun-mi] Ahead of the enforcement of the Financial Consumer Protection Act (FCPA) on the 25th, voices demanding improvements in the effectiveness of the Financial Dispute Mediation Committee under the Financial Supervisory Service are growing louder.

According to the National Assembly and financial circles on the 5th, 11 lawmakers including Kim Byung-wook of the Democratic Party of Korea have proposed an amendment to the FCPA that includes measures to enhance the effectiveness of the Dispute Mediation Committee. The core is to strengthen legal measures to enhance the expertise and independence of financial dispute mediation.

The lawmakers proposed through the FCPA amendment bill ▲ that rules related to dispute mediation must go through the committee’s review and resolution when being revised, newly established, or abolished ▲ that the committee’s composition must include at least one representative each from the mediation target institutions and financial consumers ▲ and that the committee members’ term of office be specified as three years. They also argued that the appointment of committee members should be decided by lottery at each meeting and that the committee should include at least one representative each from the mediation target institution, financial consumer representatives, applicants, and mediators agreed upon by related parties.

The Financial Supervisory Service had announced last month the revision of the ‘Dispute Mediation Rules,’ deleting the provision requiring prior approval from the committee when a party to the dispute appears before the committee to state their opinion, and reducing the discretionary power of the FSS Governor who had the authority to request a review of the committee’s resolution. However, this alone was deemed insufficient to secure expertise and neutrality.

The FSS Dispute Mediation Committee plays a role in receiving mediation applications for disputes raised by consumers against financial companies and proposing reasonable dispute resolution methods or mediation opinions to induce agreement between parties. However, under current law, the FSS Governor can appoint or commission committee members and establish or revise rules regarding the committee’s decisions without separate procedures, which has raised concerns that the committee’s expertise and neutrality functions could be undermined. Additionally, the committee is stipulated to be composed of members appointed by the chairman at each meeting, raising the possibility of arbitrary member appointments depending on the chairman’s judgment.

Calls for improving the effectiveness of the Dispute Mediation Committee have emerged amid the increasing likelihood that financial accidents causing damage to many consumers, such as the Lime and Optimus private equity fund redemption crises, will be mandatorily referred to the FSS Dispute Mediation Committee in the future. According to the ‘2021 Business Plan’ recently announced by the FSS, the agency is currently working on establishing standards to ensure that financial accidents affecting many consumers are mandatorily referred to the committee when certain conditions are met. The plan is to expand dispute resolution through the committee.

In the banking sector, reliance on the Dispute Mediation Committee is growing. Especially recently, the FSS Dispute Mediation Committee meetings have been held in conjunction with the Banking Sector Sanctions Review Committee (Sanctions Review), making acceptance of the committee’s decisions perceived as an essential step to mitigate sanction levels. Lawmaker Kim said, "Applications for dispute mediation related to financial investment products are increasing amid a series of incidents such as KIKO and Lime," adding, "To smoothly resolve increasingly complex financial products and various financial disputes surrounding them, securing neutrality and expertise in the current dispute mediation system is a priority."

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