[100 Days of the Financial Consumer Protection Act] Ongoing Confusion at Service Counters Amid Lack of Guidelines... Side Effects Emerge

100 Days Since Geumso Act Enforcement on Next Month 2nd
Controversy Over 1-Hour Product Explanation and Emergence of Loopholes
Risk of Becoming Consumer Damage Law Instead of Consumer Protection Law

[Asia Economy Park Sun-mi, Ki Ha-young Reporter]Kim Min-young (42), who visited a bank branch to sign up for an Individual Retirement Pension (IRP), wanted to choose a fund as the investment product but had no choice but to put in cash-equivalent waiting assets. This was due to the Financial Consumer Protection Act (FCPA), which requires about 1 hour and 30 minutes to include a fund in an IRP account, so the staff advised her to first subscribe to cash assets and then switch to a fund through the bank's application (app). As a result, Kim had no choice but to make an ‘incomplete choice’ by selecting and subscribing to a fund on her own without receiving any product recommendation or explanation.

The FCPA, enacted to protect the rights and interests of financial consumers, will mark 100 days since its enforcement on the 2nd of next month, but side effects continue to occur in the field. Only two out of the five guidelines originally planned by the financial authorities have been completed, leading to a surge in non-face-to-face product subscriptions to shorten product explanation time and loan cancellations abusing the right of withdrawal. Experts warn that if the field issues are not resolved promptly, the FCPA could degenerate into ‘regulation for regulation’s sake,’ completely losing its purpose and effectiveness.

According to the financial sector on the 30th, right after the enforcement of the FCPA in April, the proportion of online sales of financial products at major commercial banks such as Shinhan, Woori, Hana, and IBK Industrial Bank of Korea exceeded an average of 70%. This is analyzed as an effect of frequent encouragement of non-face-to-face product subscriptions at branches to shorten staff product explanation time after the FCPA enforcement.

There is criticism that the FCPA, introduced to prevent incomplete sales that had become customary, has ironically become a pretext to induce non-face-to-face subscriptions. Accordingly, while the responsibility of individual consumers for subscribing to financial products has increased, the interactive communication possible in face-to-face subscriptions has become impossible, causing side effects where consumers subscribe without accurate understanding of the products.

A representative from a commercial bank said, "Because of the FCPA, customer service time has lengthened, so we have no choice but to recommend app-based services to younger customers who find internet use easy," adding, "From the staff’s perspective, they prefer non-face-to-face sales because they do not have to bear responsibility for incomplete sales."

The abuse of consumers’ right of withdrawal and illegal contract termination rights due to change of mind is also problematic. There are numerous cases where consumers in urgent need of funds abuse the right of withdrawal, which allows free cancellation within a certain period, by taking out a credit loan, using the funds, and then requesting cancellation of the loan contract to get the fees refunded.

An employee at Bank A’s Yeouido branch said, "Especially during periods when short-term fund demand surges due to public offering subscriptions, many cases arise where credit loans are taken out and then canceled using the right of withdrawal when subscription money is refunded," lamenting, "Even if abuse is suspected, the bank has no choice but to accept cancellation requests 100% due to the FCPA." The insurance industry also voiced, "Since the illegal contract termination right may lead to an increase in insurance cancellations in the future, it is necessary to prepare specific procedures to respond to customers’ illegal contract termination requests."

Although financial advertising regulation guidelines have been established, frontline insurance planners express dissatisfaction and question the effectiveness of the strengthened advertising review. According to the FCPA, financial advertisements must undergo internal review and prior review by each financial industry association, but in reality, there are virtually no planners who receive prior review and post product information on blogs or social network services (SNS). Some planners adopt a detour strategy of explaining products through closed channels such as internet community messages to avoid advertising review.

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