[Exclusive] "A Second DLF·Lime Scandal Brewing?" Complaints of Incomplete Sales Among Those Aged 60 and Over Near 40%

Complaints about Incomplete Sales Decrease Overall
But Complaints from Seniors Aged 60 and Over Still Near 40%

[Image source=Yonhap News]

[Asia Economy Reporter Koo Chae-eun] Over the past three years, about 40% of complaints regarding incomplete sales of financial products at banks and securities firms submitted to financial authorities were made by seniors aged 60 and above. This indicates that many elderly people still face threats to their retirement funds due to incomplete sales by financial companies.

Incomplete sales refer to cases where financial companies fail to inform financial consumers of important matters such as the 'possibility of principal loss' during the sales process of financial products. It also includes acts of selling products based on false or exaggerated information that misleads consumers. Incomplete sales targeting the elderly became a significant issue in incidents such as the 2008 KIKO crisis, the 2013 Dongyang incident, and the 2020 interest rate-linked derivative-linked fund (DLF) and Lime Asset Management scandals involving poor private equity funds.

On the 6th, Yoon Young-duk, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, received data titled ‘Recent 3-Year Status of Incomplete Sales Complaints by Age’ from the Financial Supervisory Service. According to the data, from 2020 to June of this year, a total of 2,637 complaints related to incomplete sales of bank and securities products (excluding those without age input) were received.

Among these, 1,024 cases (38.8%) were filed by seniors aged 60 and above, the highest proportion among all age groups. The number of incomplete sales complaints from those aged 60 and above was similar between banks (38.89%) and securities firms (38.77%).

The older the age group, the more exposed they were to incomplete sales. Complaints were highest among those aged 60 and above, followed by 50-60 years (894 cases), 40-50 years (466 cases), 30-40 years (194 cases), 20-30 years (49 cases), and under 20 years (10 cases).

(Source: Financial Supervisory Service, Office of Yoon Young-duk, Democratic Party of Korea)

Looking at the data by year, the number of incomplete sales complaints peaked in 2020 at 2,100 cases (955 at banks, 1,145 at securities firms, including those without age input), the year when poor private equity fund incidents such as Lime and DLF occurred. Afterward, the numbers decreased to 938 cases in 2021 (399 at banks, 539 at securities firms) and 172 cases in the first half of 2022 (94 at banks, 78 at securities firms).

However, the proportion of complaints from those aged 60 and above still approached 40% of the total incomplete sales complaints. In 2020, the proportion of complaints from those aged 60 and above was around 36% (36.1% at banks, 36.4% at securities firms), but it rose to 45% at banks and 43% at securities firms in 2021. As of the first half of 2022, the proportion of incomplete sales complaints from those aged 60 and above was 40% at banks and 43.75% at securities firms.

The high exposure of the elderly to incomplete sales is interpreted as a result of increased life expectancy and low interest rates, which have heightened the elderly’s interest in high-yield financial products. In fact, nearly half (48.8%) of the victims of the problematic 2020 DLF incomplete sales scandal were aged 60 and above.

Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, “For the elderly, recovering from incomplete sales fraud is difficult, so the damage is greater than for other age groups,” adding, “To manage this effectively and practically, the sale of high-risk financial products to the elderly should be significantly restricted or systematically supervised.” Yoon Young-duk of the Democratic Party of Korea stated, “Policy considerations are needed for seniors who have little financial transaction experience or require help understanding complex financial contracts,” and emphasized, “Financial authorities must create an environment where the elderly can use financial services safely and conveniently.”