[Reporter’s Notebook] Why the Introduction of the "Unilateral Binding Effect" Is Concerning

While Politicians Push for a Four-Tier Court System, the Financial Sector Moves to Block Lawsuits
Decisions Made by a One-Time FSS Mediation Committee Raise Concerns Over Reasonableness and Objectivity
Side Effects Exposed in the Immediate Annui

The ruling party is pushing for the introduction of a four-tier court system as part of judicial reform. The rationale is that even Supreme Court rulings can contain errors, so constitutional appeals should be allowed. However, in the financial sector, discussions are underway about a system that would actually block lawsuits from being filed in the first place. The introduction of the "one-sided binding effect" system marks the starting point of this contradiction.

The one-sided binding effect is a system in which, in small-amount disputes, if a complainant accepts the dispute mediation proposal of the Financial Supervisory Service, the financial institution must unconditionally accept it and cannot proceed with a separate lawsuit. Since the launch of the new administration, the head of the financial authorities, who has emphasized consumer protection, has hinted at its introduction, and the ruling party has also proposed a bill.

The intention is not necessarily bad. The goal is to prevent financial companies from using their power to resist in small-amount disputes. However, financial disputes are legally and technically complex. There are significant concerns over whether the Dispute Mediation Committee of the Financial Supervisory Service can truly make rational and objective judgments. The Samsung Life Insurance immediate annuity lawsuit, which dragged on for more than seven years, is a representative example.

This case began in 2017 when immediate annuity subscribers filed a complaint with the Financial Supervisory Service, claiming that their pensions were underpaid without an explanation that business expenses would be deducted. At the time, the Dispute Mediation Committee recommended additional payments by life insurers. However, the life insurers refused, and in 2018, a class action lawsuit was filed under the leadership of the Financial Consumer Federation. Ultimately, on October 16, the Supreme Court overturned the committee's decision, ruling that the life insurers were not required to make additional pension payments.

What if the one-sided binding effect had been in place at the time? There were 160,000 immediate annuity subscribers, and the unpaid amount totaled about 1 trillion won. At approximately 6.25 million won per person, the case fell within the small-amount category (10 million to 20 million won) subject to the system. If the committee's decision had been binding, life insurers would have had to pay out a massive sum, resulting in an outcome that would have been difficult for shareholders to accept.

The one-sided binding effect could actually weaken consumer protection. In the immediate annuity case, the litigation process revealed that some life insurers had failed to fulfill their duty to explain. As a result, the Financial Supervisory Service recently took follow-up measures. Without the lawsuit, these issues would not have come to light. In disputes where consumer interests are divided, such as car accidents involving disagreements over fault ratios, a one-time decision by the committee could result in harm to certain consumers.

The composition of the Dispute Mediation Committee also cannot be considered consumer-centric. Of the 35 total members, only six (17%) represent consumers. The rest are mostly experts from financial associations or those with backgrounds in law or medicine who tend to be sympathetic to financial institutions. Structurally, the perspectives of the financial sector are inevitably more strongly reflected.

An executive at a financial institution pointed out, "From the authorities’ perspective, which is to reduce complaints, it’s easy to suggest, 'Just pay the money and settle it.'" There are concerns that a system justified in the name of consumer protection could ultimately devolve into administrative convenience. Rather than hastily introducing the one-sided binding effect, the authorities should first consider measures to minimize side effects. It is easy to quell complaints with money, but that is not true consumer protection.