"Waited 1.5 Hours but Failed"... Pension Enrollment Also as Hard as Catching Stars in the Sky (Comprehensive)

On the First Day of the Financial Consumer Protection Act Enforcement, Visiting Bank Branches
Product Enrollment Takes More Time Than Expected
System Shortcomings Cause Confusion for Both Staff and Customers

On the first day of the Financial Consumer Protection Act enforcement, the 25th, a customer is receiving consultation at a bank counter in Jung-gu, Seoul.

[Asia Economy Reporters Kiho Sung and Seungseop Song] “Dear customer, we apologize. The recorder is malfunctioning. Could you please listen to the product explanation again?” (Employee at Bank A counter, Seodaemun-gu, Seoul)

“We need to get recording certification for the product explanation, but it keeps failing. I will check with the group, so please wait a moment.” (Responsible employee at Bank B, Jung-gu, Seoul)

On the first day of the Financial Consumer Protection Act (FCPA) enforcement, the 25th, it was much more difficult and time-consuming for financial consumers to subscribe to bank products than expected, as difficult as catching stars in the sky. Although the number of customers visiting branches was not as high as usual due to the activation of non-face-to-face services amid COVID-19, some branches revealed scenes of employees floundering due to insufficient systems and prior information. Also, as product subscription took more time than expected, there were scenes of employees sweating nervously and customers expressing dissatisfaction.

On that day, the reporter personally visited Bank B in the Myeongdong area of Seoul to subscribe to a pension fund product. Upon sitting in the counter chair, the sales employee began analyzing the reporter’s investment propensity through a tablet PC prepared at the counter to comply with the 'appropriateness principle,' one of the six major sales regulations under the FCPA. Previously, this was done by answering a self-prepared questionnaire, but with the enforcement of the FCPA, the main survey contents were delivered vocally to the customer, taking about 30 minutes. The point most emphasized by the clerk was that “even principal-guaranteed products can lose up to 100% of the principal and are not protected like deposits.”

After receiving guidance on the reporter’s investment propensity, the confirmation of the duty to explain began immediately. For this, the sales employee presented a script and a recorder. The script was four pages of A4. The script, which contained a meticulous product explanation, was structured so that the employee and customer read alternately. The employee informed that “recording materials are stored for 10 years and can be provided upon customer request,” then recited all the characteristics and risks of the invested product, the maximum possible loss amount, early redemption, and repurchase conditions. After the employee’s explanation, the customer directly informed the recorder that they understood the product characteristics to complete the process.

The responsible employee explained that until yesterday, this process did not exist, but from that day forward, recording became mandatory due to the enforcement of the Financial Consumer Protection Act.

However, since it was the first time the bank employee conducted a recording, the recorder malfunctioned, causing the same part of the script to be read several times, adding more than five minutes. After about 20 minutes of recording, the process ended, and then the procedure to check whether the recording was properly saved and whether the voices of the customer and employee were clearly captured began. Due to a system error, the recording could not be confirmed, and the on-site employee explained that verification work had to be completed by the group and requested the customer to wait again. The group notified that since the recording could not be confirmed, an exception reason should be noted and the next step proceeded. The system malfunctioned again, and eventually, the group IT team explained that the recording seemed not to have been saved and that it needed to be recorded again. The total time spent subscribing to the product was 1 hour and 30 minutes. The reporter ultimately gave up on subscribing to the product due to the explanation that the recording had to be redone.

According to the employee, similar problems were identified during a pilot implementation with some customers the previous day. Although recording was conducted, the files were not saved in the system. The bank reportedly recognized this fact belatedly after selling the product to customers and called back customers whose recording files were missing to conduct the recording process again.

"Additional time required for product explanation... Concerns over work overload leading to decline in sales performance"

Such scenes of floundering due to insufficient preparation were found one after another at each bank branch. A representative of Bank C in Jongno-gu, Seoul, said, “Even subscribing to relatively simple products took considerable time, causing customers to inevitably raise complaints,” adding, “We cannot argue with customers, but I worry that frequent conflicts will arise.”

Lee Sung-in (32 years old, pseudonym), an office worker who visited this bank, said, “I explained my situation to the company and came out briefly to subscribe to a product, but it took much longer than expected,” and pleaded, “I am now considering whether I need to take half a day off when I visit the bank in the future.”

Concerns remain on the ground. A representative of Bank D branch located in the Gwanghwamun area of Seoul said, “As additional explanations such as product withdrawal increase, work overload will cause more time to be spent on customer service,” and expressed worry that “Overall sales performance will decline.”

Although the FCPA has been enforced, unclear guidelines remain a problem. A representative example is the ambiguous scope of compensation that banks must provide when customers demand compensation for illegal contract termination. A representative of Bank C branch said, “It is still tight to reestablish sales rules and build IT systems,” and appealed, “Since the authorities have not presented clear enforcement rules, it is not easy to prepare measures that can respond 100% to all problems on the ground.”

Meanwhile, the core of the FCPA is to expand the six major sales regulations to all financial products. The sales regulations mean ▲the suitability principle ▲the appropriateness principle ▲the duty to explain ▲prohibition of unfair sales practices ▲prohibition of improper solicitation ▲prohibition of false or exaggerated advertising.

Financial companies violating these are subject to 'punitive fines' of up to 50% of related revenue, and sales employees face fines of up to 100 million KRW. It has become virtually impossible for financial sales employees to actively recommend products.

The regulation banks are most concerned about is the 'burden of proof for damages.' If a consumer invests in a high-risk product (with a possibility of principal loss exceeding 20%) without proper explanation and suffers losses, and then claims damages, the financial company must prove that there was no intention or negligence.

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