Guidance Period for the Financial Consumer Protection Act Ending... Confusion Before Sanctions Begin

6-Month Grace Period for the Financial Services Act Ends on September 24
Financial Companies in Final Preparations to Avoid Becoming 'No. 1' Violators
Financial Sector Complains, "Many Ambiguities Still Remain on the Ground"

[Asia Economy Reporters Sunmi Park, Hayoung Ki, Seungseop Song] "Even after the Financial Consumer Protection Act (FCPA) grace period ends on the 24th, it may be difficult to resume sales of open-ended high-risk products such as leverage inverse funds due to issues like customer guidance on the cooling-off system and product value deterioration caused by price fluctuations." - A major commercial bank

As the six-month grace period for the FCPA, which was granted, comes to an end on the 24th, the entire financial sector is making last-minute efforts to avoid being labeled as the 'first violator of the FCPA.' However, despite making final internal system adjustments to comply with the FCPA as required by the authorities, there is uncertainty about what can be done during the grace period, leading to repeated complaints that, from a conservative perspective, they have no choice but to handle operations cautiously to avoid sanctions for violating the FCPA.

According to the financial sector on the 13th, major commercial banks shared a common view that even after the FCPA grace period ends on the 24th, there will be no significant changes from the preparations and implementations made before the FCPA enforcement date of March 25. Many parts of the authorities’ guidelines remain unclear, so there was not much that could be prepared during the grace period. The sale of complex products, which had hit a wall in the banking sector, still lacks a solution, so sales suspensions are likely to continue. Additionally, the key investment product explanation documents that must be provided to customers have not resolved issues caused by their vast scope and volume, resulting in ongoing inconvenience for both banks and customers.

A representative from a commercial bank said, "During the grace period, guidelines related to the suitability principle and duty of explanation were issued, but there are no effective measures or clear standards, making practical application difficult," adding, "For this reason, even after September 25, it is unlikely that the existing processes will change significantly." He continued, "Regarding the key investment product explanation documents, the Financial Supervisory Service and others have not provided guidelines," adding, "Each seller is struggling due to a lack of time to prepare these documents."

Financial Sector: "Regulators’ Responses and Principles Still Ambiguous"

Concerns have been raised that, as each seller individually interprets ambiguous legal provisions and practical application methods during the FCPA preparation process, sales procedures that align with the purpose of protecting financial consumers have not been established. Another bank official said, "It is urgent to establish basic practical handling methods and sales procedures through collaboration between financial institutions led by the government and financial authorities," adding, "Many of the authorities’ responses and measures regarding the FCPA remain at a principled level."

There are also complaints that, in the method of providing contract documents, the legal provisions were created without considering the unique characteristics of each product and channel, making it difficult to implement the three methods (written, internet, text message, or equivalent electronic expression) across all channels. A bank official said, "The number of contract documents has increased, and the information that must be included has also grown, but the amount that can be conveyed via text message is limited," adding, "The key explanation documents must also include frequently asked questions and complaints, making it difficult to manage the volume."

In fact, financial companies have reportedly made many inquiries to the financial authorities during the grace period regarding ambiguities and uncertainties in the application and interpretation of the FCPA. An official from the authorities said, "For example, joint guarantees are generally prohibited under the FCPA, but exceptions exist, so many inquiries were made by industry sectors presenting cases to check for violations," adding, "Some also asked whether there were any errors in the process of delivering contract documents."

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