Financial Research Institute: "Although Penalties under the Financial Consumer Protection Act Have Been Strengthened, Consumer Damage Relief Measures Remain Insufficient"

Researcher Sangje Lee: "Measures for 'Financial Authorities-Led Damage Relief' Must Be Strengthened"

Eun Sung-soo, Chairman of the Financial Services Commission, is listening to a bank employee about the current status of the Financial Consumer Protection Act at the KB Kookmin Bank Gwanghwamun Comprehensive Financial Center.

[Asia Economy Reporter Kwangho Lee] Since the enforcement of the Financial Consumer Protection Act (hereinafter referred to as the FCPA), sanctions, penalties, and business regulations have been strengthened, but there is an assessment that means for the actual recovery of consumer losses or relief of damages are still insufficient.

On the 13th, Sangje Lee, Senior Research Fellow at the Korea Institute of Finance and former Director of the Financial Consumer Protection Division at the Financial Supervisory Service, stated in the report "Types and Implications of Financial Authority-Led Financial Consumer Damage Relief" that "the means of financial authority-led damage relief should be strengthened."

Financial authority-led damage relief refers to the intervention of financial authorities in consumer damages to provide relief or compensation to financial consumers. The damage relief measures led by financial authorities suggested by the researcher include persuasion/recommendation, approval, and enforcement/orders.

First, persuasion/recommendation is when the financial authority, as a neutral third party, induces financial companies to remedy consumer damages.

The researcher argued, "For persuasion/recommendation to work effectively, procedures must be established that consider voluntary damage relief when deciding whether to initiate inspections or when determining sanctions or the level of fines."

Approval is a method where the financial authority establishes a consumer damage compensation plan and obtains court approval. Currently, the UK's Financial Conduct Authority (FCA) utilizes this method.

Enforcement/orders are the strictest form of damage relief measures. This includes the authority of financial authorities to propose damage relief plans, order financial companies to participate in negotiations or submit voluntary damage relief proposals, and the supervisory agency’s authority to request court approval of damage relief orders on behalf of consumers.

The researcher pointed out, "Although there have been past legislative attempts for damage relief orders, they have only been reflected at a declarative level, and procedures such as suspension of sanctions with a time limit or orders have not yet been introduced."

He emphasized, "It is necessary to seek improvements in the system for consumer damage recovery by referring to the purpose, fundamental spirit, positive functions, and practical utilization methods of financial authority-led damage relief systems, which are becoming a global trend."