[Editorial] Three Arrows Aimed at the Financial Sector

Following my previous column (published on July 4, "Responsibility Structure of Financial Companies"), I would like to discuss another unfamiliar term. Although I have tried to avoid it due to its complexity, complaints about it have been pouring in from various financial institutions.

This is about the "One-sided Binding Force" system. In cases of small-scale financial disputes between consumers and financial companies, this system requires financial companies to comply with the mediation decisions of the Dispute Mediation Committee, which operates under the Financial Supervisory Service, without additional litigation, as long as the consumer agrees.

President Lee Jaemyung proposed this as a campaign pledge, and the National Policy Planning Committee has included it as a national policy task and is pushing for its adoption. This requires an amendment to the law. The current Financial Consumer Protection Act (Article 39, Effect of Mediation) stipulates that "if both parties accept the mediation plan under Article 36, Paragraph 5, the mediation plan shall have the same effect as a judicial settlement."

B, an executive at Securities Firm A whom I met earlier this month, is usually reserved and rarely discusses work matters. However, when he brought up the "One-sided Binding Force" issue, he raised his voice. "This is an unreasonable system. Even if it is a small-scale financial dispute, requiring us to unconditionally follow the Dispute Mediation Committee's decision is something that needs to be reconsidered." His uncharacteristic agitation made me think he was overreacting.

However, three days later, D, the CEO of Securities Firm C, also expressed serious concerns about the "One-sided Binding Force" system. He worried, "This system infringes on the constitutional right to a fair trial and could deal a significant blow to the management of financial companies."

Despite the urgent pleas from financial companies, the arrow of "One-sided Binding Force" is already drawn and aimed. The criteria for what constitutes a small-scale financial dispute are already being discussed in detail. Initially, "less than 20 million won" (considering that over 80% of all dispute mediation cases handled by the Financial Supervisory Service are under 20 million won) was strongly considered, but currently, "less than 10 million won" (taking into account the compensation burden on financial companies) is gaining more support.

Within the financial sector, the securities and insurance industries are particularly anxious. This is because small-scale financial disputes occur more frequently due to the nature of their businesses. Furthermore, even if the dispute is small, if a mediation decision is applied to a specific product, the mediation plan must be applied to all customers who purchased that product. This means the total compensation amount could snowball. This is why CEO D is concerned about the impact on business management. There are also concerns about the potential abuse of the system by some black consumers (malicious complainants) who might file excessive mediation requests.

Globally, only a few countries such as the United Kingdom, Germany, Australia, and Japan have adopted the "One-sided Binding Force" system. If we are to enforce it as well, we should consider measures that do not completely block financial companies from responding, as in the UK (where financial companies can file objections) or Japan (where the effect is nullified if the financial company files a lawsuit within one month). To achieve this, financial companies must also demonstrate their commitment to minimizing causes for disputes, such as incomplete sales, in advance to make their arguments more convincing.

The financial sector is currently exposed to three arrows: the amendment of the Commercial Act, the introduction of the Responsibility Structure, and the One-sided Binding Force system. All three pose significant burdens on the management of financial companies.

President Lee Jaemyung declared "pragmatic market-oriented policy" as his first message upon taking office. This was supposed to mean empowering businesses (including financial companies), but on the ground (in the market), skepticism still prevails. "Right turn signal, left turn movement" will only lead to traffic congestion (market confusion).