"'Small Postpaid Payments' Also Subject to Same Sales Regulations as Loan Products"

Financial Services Commission Announces Legislative Notice for Amendment to the Enforcement Decree of the Financial Consumer Protection Act
Establishing the Principle of Same Function-Same Regulation

On the 10th, the Financial Services Commission announced the legislative notice and regulatory amendment notice for the Enforcement Decree of the Financial Consumer Protection Act and the Financial Consumer Protection Supervision Regulations, which apply the same sales regulations for loan-type products to small-amount deferred payment services.

The amendment defines small-amount deferred payment as a loan-type product, considering its nature as a credit extension. Accordingly, the same sales regulations under the Financial Consumer Protection Act, such as the obligation to provide explanations, will be applied to small-amount deferred payment services, ensuring that financial consumers can enter into contracts with a clear understanding of the financial product details. The Financial Services Commission explained, "By establishing the principle of 'same function - same regulation,' we can block the possibility of unreasonable regulatory arbitrage and significantly enhance the protection of financial consumers using small-amount deferred payment services."

However, to apply sales regulations reasonably, some exceptions regarding small-amount deferred payment were recognized. The Financial Consumer Protection Act requires that the 'financial consumer's repayment ability' be evaluated in a prescribed manner when applying the suitability principle, but exceptions allow certain loan-type products such as credit cards to be evaluated according to their own standards within the necessary scope due to their characteristics. Since small-amount deferred payment is primarily targeted at those with insufficient financial history who generally find it difficult to obtain credit cards, an exception was made to allow the application of the suitability principle based on their own standards, similar to credit cards.

The amendment also excludes small-amount deferred payment from the scope of the right to withdraw from subscription and exempts small-amount deferred payment business operators with total assets under 5 trillion won from the obligation to establish an internal control committee for financial consumer protection, aligning the regulatory level with that of credit card companies and specialized credit finance companies.

The proposed amendments to the Enforcement Decree of the Financial Consumer Protection Act and the Financial Consumer Protection Supervision Regulations will be implemented after legislative notice and regulatory amendment notice until August 12, followed by approval at the Vice Ministerial Meeting and the Cabinet Meeting.