Financial Product Descriptions May Be Adjusted in Degree and Method According to Financial Institution's Own Standards

Guidelines for Reasonable Implementation of Financial Product Explanation Obligations under the Financial Consumer Protection Act Established
Financial Authorities: "A Continuous Improvement System Will Be Established to Ensure Timeliness and Effectiveness"

[Asia Economy Reporter Kwangho Lee] Going forward, financial product sellers must explain all important matters listed in the Financial Consumer Protection Act when recommending products to general financial consumers. However, to reasonably fulfill the explanation obligation, the degree and method of explanation can be adjusted based on standards established internally. Financial authorities have decided to establish a continuous supplementation system to ensure the timeliness and effectiveness of the guidelines.

The Financial Services Commission and the Financial Supervisory Service announced on the 14th that they have prepared the "Guidelines for the Reasonable Fulfillment of Financial Product Explanation Obligations," which include these contents, after holding a total of four meetings with the entire financial sector since May.

According to the guidelines, financial product sellers must provide integrated and organized explanations of the matters required under the Financial Consumer Protection Act and the Capital Markets Act.

The scope of the explanation obligation under the Financial Consumer Protection Act is limited to matters stipulated by law to resolve uncertainties regarding violations and sanctions in the field. Matters not stipulated by law may be explained voluntarily by sellers if necessary, considering the consumer's information absorption capacity.

In particular, sellers may set the "range within which consumers can choose to simplify explanations" by considering the importance and difficulty of the explanation matters and the consumer's situation. Also, to help consumers understand effectively, sellers can principally use videos, artificial intelligence (AI), etc., instead of oral explanations.

Sellers must autonomously comply with the requirements when preparing explanatory documents under the Financial Consumer Protection Supervision Regulations, within the scope that does not deviate from the purpose of the explanation obligation, and establish their own standards for preparing explanatory documents based on empirical data on consumer behavior and analysis of complaints and disputes.

Financial authorities plan to establish a continuous supplementation system by next month to ensure the timeliness and effectiveness of the guidelines.

A consultative body composed of private research institutions will prepare annual recommendations for supplementing the guidelines and submit them to the Financial Services Commission and the Financial Supervisory Service. Subsequently, the supplemented guidelines will be finalized after review by the Financial Services Commission Ombudsman.

The guidelines will be continuously supplemented based on domestic and international best practices related to financial product explanations, analysis of complaints and dispute cases, and results of Financial Supervisory Service supervision and inspections. Additionally, plans to strengthen financial education related to financial transaction methods will be prepared by December.

Considering that the effectiveness of sellers' explanations of financial products can increase as consumers' financial capabilities improve, measures will be devised to enable more effective education on consumer rights under the Financial Consumer Protection Act and precautions when trading financial products, with plans to submit these to the Financial Education Council within the year.

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