Consumer Protection Promised... Financial Dispute Resolution Takes One Year (Comprehensive)

Dedicated Dispute Resolution Staff 'Barely' Increased
Many Complex Disputes but Staff Severely Insufficient
Financial Dispute Resolution Period 10 Times the Regulatory Deadline

[Asia Economy Reporters Park Sun-mi and Song Seung-seop] Kim Sang-cheol (45, pseudonym) applied for dispute mediation with the Financial Supervisory Service (FSS) at the end of last year. This was after the insurance company refused to pay the insurance money that his mother was supposed to receive, citing "difficulties according to the policy terms." Kim expected the issue to be resolved quickly, as the regulation states it should be handled within 30 days, but it took 130 days to receive a response. Moreover, the reply conveyed the insurer’s position that the payment could not be made and suggested that if he felt unfairly treated, he should file a lawsuit in court.

It has been found that the dispute mediation process between financial companies and consumers is taking nearly ten times longer than the legally stipulated deadline. This is due to the increased demand for dispute resolution caused by more complex financial products, while the FSS’s dedicated dispute mediation personnel are severely insufficient. Recently, the FSS requested the Financial Services Commission (FSC) to increase the number of dedicated dispute mediation staff by about 20, but has yet to receive a definite answer. There are calls for devising measures to shorten the processing period, even if it requires assistance from external organizations.

According to data submitted by the FSS to Yoon Chang-hyun, a member of the National Assembly’s Political Affairs Committee from the People Power Party, it took an average of 353 days to process 115 banking sector financial disputes as ‘accepted’ in the first half of this year. This means that the results were received about a year after the disputes were filed. The processing time increased more than 100 times compared to 30 days in 2018 and nearly doubled compared to 183 days last year.

The situation is similar in the non-banking sector. The loan, insurance, and financial investment industries saw dispute processing times increase from 51 days, 51 days, and 46 days last year to 130 days, 77 days, and 109 days in the first half of this year, respectively. Only the credit card sector shortened its processing time from 30 days last year to 24 days in the first half of this year, the only sector to do so. As of the first half of this year, the dispute mediation processing rate was over 90% only in insurance, while banks recorded 64%, non-banking/credit/loan 85%, and financial investment 76%.

Financial dispute mediation is a procedure where the FSS mediates disputes filed by consumers against financial companies. It aims to find reasonable solutions, induce agreement between parties, and resolve disputes amicably. According to the Financial Consumer Protection Act, decisions such as acceptance, dismissal, or other outcomes must be made within 30 days from the date of receipt.

Severely Insufficient Dedicated Staff... "Measures Needed to Improve Processing Speed"

Although financial consumer protection is emphasized, the lengthening of dispute mediation processing times is due to the severe shortage of dedicated dispute mediation personnel within the FSS. In the organizational restructuring of the FSS earlier this year, the number of dispute mediation divisions under the Financial Consumer Protection Department was increased from two to three to respond to the surge in dispute demand. However, the total number of staff dedicated to dispute mediation across all financial sectors is only 39, including 3 for banks, 6 for financial investment, and 26 for insurance. This is only 1 to 2 more than during the 2019-2020 private equity fund crisis.

A senior FSS official stated, "The delay in confirming the amount of damages due to the private equity fund redemption suspension issue also contributed to the overall lengthening of dispute processing times. However, fundamentally, there is a severe shortage of personnel sufficient to strengthen consumer protection." He added, "We requested the FSC to add about 20 specialized dispute processing personnel, but with many issues in digital supervision such as Merge Point and virtual currencies, it is uncertain whether the staffing will be properly increased."

If internal staffing increases are difficult, there are calls to devise ways to speed up processing by seeking help from external organizations. Representative Yoon emphasized, "Financial supervision exists to protect consumer rights. Since both the results and processing speed of dispute mediation are important, it is time to consider delegating on-site inspections and preliminary reviews to specialized agencies to accelerate the process."

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