No 'Excellent' Ratings in Financial Consumer Protection Evaluations... 'Good' Ratings Also Plummet

The Impact of a Surge in Financial Complaints Amid Private Equity Fund Crises Such as Lime and Optimus

[Asia Economy Reporter Park Sun-mi] Amid the surge in financial complaints during the Lime and Optimus private equity fund scandals, no company received an overall rating of "Excellent" in the Financial Consumer Protection Performance Evaluation.

On the 6th, the Financial Supervisory Service (FSS) announced that in the "2021 Financial Consumer Protection Performance Evaluation," no company received an overall "Excellent" rating, the number of companies rated "Good" significantly decreased, and the number of companies rated "Average" increased.

The FSS has conducted the financial consumer protection performance evaluation annually, but this evaluation is significant as it was the first conducted based on the Financial Consumer Protection Act (FCPA) enacted on March 25 of last year. The evaluation covered 26 companies across seven financial sectors, focusing on the operation status of internal control systems such as dedicated consumer protection organizations within financial companies, consumer protection systems related to product development, and consumer protection systems related to product sales.

In the overall and sector-specific evaluation results, among the 26 companies evaluated, only three?Kookmin Bank, Hyundai Card, and Samsung Securities?received an overall "Good" rating. Compared to the 2020 evaluation results, the number of companies rated "Good" or higher decreased by seven, while the number of companies rated "Average" increased by nine. The number of companies rated "Poor" decreased by one. The decrease in companies rated "Good" or higher reflects the strengthened qualitative evaluation of the thoroughness of financial companies' internal control systems related to consumer protection, as well as the downward adjustment of overall ratings due to the increase in complaints and severe disciplinary actions resulting from the private equity fund scandals and increased securities trading.

In sector-specific ratings, the number of companies rated "Good" or higher decreased in both quantitative and non-quantitative sectors. In the quantitative sector, "Prevention of Complaints" saw a decrease of five companies rated "Good" or higher compared to the previous year due to increased complaints related to private equity funds and securities system failures in some banks and securities firms. The "Efforts in Complaint Handling and Consumer Litigation" category saw a decrease of two companies rated "Good" or higher compared to the previous year due to a decline in the rate of voluntary dispute resolution.

In the non-quantitative sector, all five categories saw a decrease in the number of companies rated "Good" or higher compared to the previous year, with a notable decline in the "Dedicated Consumer Protection Organization" and "Consumer Protection System Related to Product Sales" categories. This is attributed to insufficient follow-up management on the discussion topics of the Consumer Protection Council, the overall consumer protection body, and a lack of review and improvement efforts regarding the evaluation system for sales staff by the Chief Consumer Officer (CCO).

The evaluation results by financial sector showed mixed outcomes.

In the banking sector, among five banks, one received a "Good" rating and four received an "Average" rating. Kookmin Bank, Busan Bank, and Hana Bank each improved by one grade compared to the previous year, while Kakao Bank and Kyongnam Bank maintained the same "Average" level as the previous year.

In the life insurance sector, among six companies, four received an "Average" rating and two received a "Poor" rating. Samsung Life Insurance improved by one grade, while DGB and Heungkuk Life Insurance dropped by one grade. Tongyang Life Insurance, KDB Life Insurance, and MetLife Life Insurance maintained the same level as the previous year. Due to the decline in voluntary dispute resolution rates and an increase in litigation loss rates, the number of companies rated "Good" or higher in complaint handling efforts and litigation decreased by two. Additionally, the decrease in companies rated "Good" or higher in the dedicated consumer protection organization and product sales-related consumer protection system categories was due to insufficient operation of the Consumer Protection Council and inadequate improvement efforts in the sales department performance evaluation system by the CCO.

Due to increased complaints related to whole life insurance and insufficient efforts in dedicated consumer protection organizations, product development, and sales-related consumer protection, two companies (DGB and KDB) were rated "Poor" overall.

In the non-life insurance sector, all four companies received an "Average" rating. Hyundai Marine & Fire Insurance, Samsung Fire & Marine Insurance, and KB Insurance each dropped one grade from "Good" the previous year. In the card and specialized credit finance sector, among three card companies, one received a "Good" rating and two received an "Average" rating, while one specialized credit finance company received a "Poor" rating. Hyundai Card (Good) and Shinhan Card (Average) each dropped one grade, and Hyundai Capital, evaluated for the first time this year as a non-card specialized credit finance company, received a "Poor" rating. Additionally, in the securities sector, among four companies, one received a "Good" rating and three received an "Average" rating, while all three savings banks received an "Average" rating.

An FSS official stated, "In accordance with the FCPA, the evaluation results will be notified to the evaluated companies and sector-specific associations for publication," adding, "Financial companies rated 'Poor' in the overall and non-quantitative evaluations will be required to make improvements, and improvement plans will be collected from each company to verify their implementation." The financial authorities plan to encourage improvements in internal control systems by conducting performance evaluations in 2022 for companies rated "Poor," regardless of the evaluation cycle.

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