[Chaos in the Financial Consumer Protection Act] "Manual Not Finalized Despite Imminent Enforcement" Financial Sector in Disarray

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[Asia Economy Reporter Kwangho Lee] With only two weeks left until the enforcement of the Financial Consumer Protection Act (FCPA), the financial sector is in a state of emergency due to ambiguous guidelines. Although financial companies are fully engaged in preparation work amid expectations that the FCPA will be the biggest variable in management this year, concerns are rising that initial chaos is inevitable because the legal framework remains insufficient. Experts emphasize that the FCPA could increase disputes between financial companies and consumers, urging financial authorities to establish clearer standards.

According to financial authorities and the financial sector on the 8th, the FCPA, which strengthens six major sales regulations for financial companies, will be enforced starting on the 25th. Accordingly, financial companies must sell financial products considering consumers’ assets and investment experience, notify customers if sales are deemed inappropriate, explain contract terms one by one, and record the sales process. Punitive fines will be imposed for violations.

Ahead of the FCPA enforcement, financial companies have taken measures such as strengthening employee training and expanding the scope of sales recordings to prevent incomplete sales and avoid liability, but they are already expressing difficulties. This is due to the fact that they have not yet received the Q&A manual and the FCPA content is extensive, resulting in an absolute shortage of preparation time.

A senior executive at a commercial bank said, “The content related to the FCPA is too extensive,” and added, “It will take a considerable amount of time for frontline employees to adapt to a completely different work environment, departing from previous work policies or practices, so initial confusion is inevitable.”

Discontent is also growing over the lukewarm response from financial authorities. In fact, the Financial Services Commission announced the enforcement decree for public comment on October 28 last year, collected industry opinions until December 8, and announced major changes on January 18. The supervisory regulations were administratively notified on December 24 last year, but the enforcement rules have not yet been finalized. The request for review by the Ministry of Government Legislation was made only on the 4th of this month.

Delays in appointing a financial authority official to oversee communication with financial companies at this critical time before the FCPA enforcement have also drawn criticism. After Lee Myung-soon, director of the Financial Consumer Bureau and the FCPA coordinator, moved to become a standing member of the Securities and Futures Commission, the position remained vacant for over ten days. On the 4th, Park Kwang, the Planning and Coordination Officer, was appointed as the successor.

Experts see how financial companies specifically comply with the six major principles as the key issue. Professor Kim Dae-jong of the Department of Business Administration at Sejong University diagnosed, “Legislation should clearly and distinctly establish violations and penalties, but the FCPA has shortcomings,” adding, “As financial products become increasingly diverse and the law is broadly applied, financial companies are likely to be greatly concerned about the increase in disputes.”

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