[Ki Ha-young's Daily Card] The Financial Consumer Protection Act Effective from the 25th Includes Card Loans and Revolving Credit

Enforcement of the Financial Consumer Protection Act from the 25th
Applicable to Card Loans, Cash Services, Revolving Credit, etc.

Is there anyone these days without at least one credit card? In modern society, anyone can have a card if they want. Credit cards have brought unparalleled convenience to daily life. Now, wherever you go, you can easily see people paying with credit cards or smartphones. As demand has increased, cards with various benefits are being released almost daily. In response, Asia Economy delivers diverse stories related to cards, which are inseparable from our consumer life, through the weekly 'Cards in Daily Life' corner, including introductions of new cards, behind-the-scenes industry stories, and guides for card beginners.

Starting from the 25th, the Financial Consumer Protection Act (FCPA) will be enforced. The main point is to expand the '6 major sales regulations,' which previously applied only to some financial products, to all financial products. Financial companies violating this will face 'punitive fines' of up to 50% of related revenue, and sales employees may be fined up to 100 million KRW.

The 6 major sales regulations are the suitability principle, appropriateness principle, duty of explanation, prohibition of unfair sales practices, prohibition of improper solicitation, and prohibition of false or exaggerated advertising.

In the case of card usage, prepaid and debit payments are not considered financial products and thus are not subject to the FCPA. However, card loans are regulated. Cash advances and revolving payments (partial payment deferral agreements) are also subject to FCPA regulations such as the duty of explanation related to credit card contract formation.

For example, if you unknowingly have a revolving payment plan that allows you to defer part of this month's card payment to the next month, it can be considered a failure to properly fulfill the duty of explanation under the FCPA.

The most tangible changes when the FCPA is enforced will be the 'right of withdrawal' and the 'right to cancel illegal contracts.' The right of withdrawal allows consumers to cancel a financial product contract within a certain period after subscribing. Previously, this applied only to investment advisory services and insurance, but now it is expanded in principle to all financial products. The withdrawal period varies by product: loan-type products must be withdrawn within 14 days, protection-type products within 15 days, and investment-type products within 9 days (including a 2-day cooling-off period under the Capital Markets Act).

Additionally, consumers can exercise the 'right to cancel illegal contracts,' which allows contract termination for incompletely sold products. If a financial company violates any of the 6 major sales regulations or there is a legitimate reason for cancellation, consumers can claim this right within 5 years from the contract date or within 1 year from the date they became aware of the violation. The contract becomes void from the cancellation date. However, initial costs incurred until cancellation, such as loan interest, card annual fees, and fund fees, are excluded from refunds.

The FCPA is a system implemented to protect the rights of financial consumers. Since it was created to prevent consumer harm caused by complex financial product structures and information asymmetry, it requires our active efforts to exercise these rights. There will be some trial and error during the initial enforcement period, but we must watch closely to ensure the system is well established.

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