Financial Supervisory Service Announces Organizational Restructuring and Consumer Protection Improvement Roadmap
Establishment of a 'Consumer Protection Supervisory Division' Directly Under the Governor
Shifting the Focus of Consumer Protection from Post-Incident Remedies to Prevention
Pursuing the Introduction of Special Judicial Police to Crack Down on Financial Crimes Affecting Everyday Life
Lee Chanjin, Governor of the Financial Supervisory Service (left), is attending the "Meeting between the Governor of the Financial Supervisory Service and Financial Holding Company Presidents" held on the 10th at the Bankers' Hall in Jung-gu, Seoul. Photo by Dongju Yoon
The Financial Supervisory Service will establish a new "Consumer Protection Supervisory Division" directly under the Governor to strengthen its financial consumer protection function. The organization will shift from a past focus on post-incident remedies for a small number of victims to enhancing proactive, preventive consumer protection for the general public. The introduction of special judicial police (SJP) to crack down on financial crimes affecting everyday life, such as voice phishing, is also being pursued.
Establishment of a 'Consumer Protection Supervisory Division' Directly Under the Governor
On December 22, the Financial Supervisory Service announced its organizational restructuring plan, stating that it would establish the Consumer Protection Supervisory Division directly under the Governor to build a supervisory service system focused on proactive consumer protection.
The Consumer Protection Supervisory Division is being created by separating the consumer protection function from the existing Financial Consumer Protection Bureau and granting it comprehensive oversight authority over all supervisory services. With the expansion of the organization and its direct reporting line to the Governor, all resources of the Financial Supervisory Service can now be utilized for proactive consumer protection, according to the agency.
This restructuring addresses concerns that the Financial Consumer Protection Bureau, which was responsible for consumer protection within the agency, operated as a separate division and lacked organic cooperation with other departments. In particular, the Bureau has been criticized for focusing primarily on post-incident responses, such as dispute mediation and financial accident investigations, rather than on preventing harm in advance, which has limited its effectiveness in protecting consumers.
Under the Consumer Protection Supervisory Division, there will be the Consumer Protection Supervision Bureau, the Consumer Damage Prevention Bureau, and the Supervision Innovation Bureau. The Consumer Protection Supervision Bureau will be responsible for regulations and improvements related to consumer protection and responses to financial crimes affecting everyday life. The Consumer Damage Prevention Bureau will oversee and manage enhanced supervision of the manufacturing, design, and review stages of financial products to ensure that risks are considered from the consumer's perspective. The Supervision Innovation Bureau will handle the supervision of financial company governance, address key common issues in the financial industry, and supervise financial conglomerates.
A new "Consumer Rights Protection Bureau," responsible for operating the Financial Dispute Mediation Committee and evaluating the consumer protection status of financial companies, will also be established under the Consumer Protection Supervisory Division. This is a preemptive measure in anticipation of a significant increase in mediation demand if unilateral binding force is introduced for the committee's decisions in the future.
Lee Sehoon, Senior Deputy Governor of the Financial Supervisory Service, stated at a briefing, "The core of this organizational restructuring is to strengthen the preventive function of financial consumer protection," adding, "Although there have been some changes in the insurance organization, the name and functions of the Financial Consumer Protection Bureau will be maintained for the time being."
Through this restructuring, the direct dispute mediation function previously handled by the Financial Consumer Protection Bureau will be transferred to the product-specific departments for each sector. This decision addresses concerns that the separation of dispute mediation from the product review and policy departments hindered effective, coordinated responses to disputes between consumers and financial companies. For the insurance sector, which sees a high volume of dispute complaints, the function will be transferred under the Financial Consumer Protection Bureau to enable more proactive dispute resolution.
A Financial Supervisory Service official emphasized, "With this restructuring, a one-stop consumer protection system will be established for each sector, covering the entire process from product review to dispute mediation and inspection. In particular, having the same department handle both product review and dispute mediation will create synergy between these functions and help prevent the spread of consumer harm."
Shifting the Focus of Consumer Protection from Post-Incident Remedies to Prevention
Along with the organizational restructuring, the Financial Supervisory Service also unveiled its "Consumer Protection Improvement Roadmap," outlining its future work plans. The core of this roadmap is to shift the current consumer protection paradigm, which focuses on post-incident remedies for a small number of victims, to a proactive, preventive approach aimed at the entire population.
To this end, the Financial Supervisory Service plans to establish a "risk-based consumer protection supervisory system" that monitors risk factors from a consumer protection perspective, detects risks, responds through supervision and inspection activities, and then implements corrective measures. In the past, the agency's work focused on post-incident remedies such as dispute mediation following large-scale consumer harm, but going forward, the emphasis will be on removing risk factors in advance through proactive measures.
Other initiatives include guaranteeing financial consumers' access to financial information and their right to choose financial products, as well as improving the convenience of financial transactions to further enhance consumer rights. The agency also plans to strengthen consumer guidance to prevent unfair changes to financial product terms, such as "blind" changes to loan interest rates. Additional measures include improving notification and alternative issuance procedures when credit cards are discontinued, and diversifying maturity options for retirement pension time deposits to strengthen consumers' right to choose financial products.
For financial companies, it was pointed out that the level of penalties for failing to protect consumers has not been high, leading companies to focus more on the benefits of sales than on the costs of consumer harm. It was also noted that, although digital technology has improved the convenience of financial transactions, the security systems in the financial sector have not kept pace.
Pursuing the Introduction of Special Judicial Police to Crack Down on Financial Crimes Affecting Everyday Life
The Financial Supervisory Service is also pursuing the introduction of special judicial police (SJP) to crack down on financial crimes that impact everyday life. SJP is a system that grants limited investigative authority to officials of relevant administrative agencies to improve the efficiency of investigating specialized crimes. Currently, the SJP function within the Financial Supervisory Service is limited to investigating unfair trading practices in the capital market, but the agency plans to expand its scope to include financial crimes affecting everyday life, such as voice phishing.
This restructuring follows Governor Lee Chanjin's repeated statements that he would push for the introduction of SJP to address financial crimes affecting everyday life. Governor Lee is also pursuing the granting of investigative authority to the SJP within the Financial Supervisory Service. Investigative authority means that the investigative agency can directly detect clues to crimes and actively conduct investigations. Currently, the SJP within the Financial Supervisory Service can only investigate cases that have been referred to the prosecution through the Securities and Futures Commission under the Financial Services Commission and are under the direction of a prosecutor. Governor Lee argued, "Because the Financial Supervisory Service lacks investigative authority, it takes more than two weeks to investigate certain cases such as stock price manipulation, during which time evidence can be destroyed."
To introduce SJP, the Financial Supervisory Service plans to establish a Task Force for the Promotion of Special Judicial Police under the Consumer Protection Bureau's Division for Responding to Financial Crimes Affecting Everyday Life, as well as a Financial Crime Information Analysis Team to analyze and manage information on financial crimes, including the latest criminal methods and trends. The Task Force will work with the Office for Government Policy Coordination and related ministries (such as the Ministry of Justice and the Financial Services Commission) to prepare relevant legislative amendments and push for their swift passage in the National Assembly.
Senior Deputy Governor Lee stated, "There is consensus that we must respond with full force to financial crimes affecting people's livelihoods because the damage is so severe. However, practical coordination is needed regarding the authority, scope, and targets of SJP."
Regarding investigative authority, he explained, "For the capital market, SJP's investigative authority was limited because the Financial Services Commission has investigative powers, but for SJP targeting financial crimes affecting everyday life, there are no such restrictions, so investigative authority is expected to be granted upon introduction."
A Financial Supervisory Service official commented, "With the introduction of SJP, the department responsible for financial crimes affecting everyday life will leverage its high level of expertise and vast information resources to identify and apprehend criminal organizations. By tracking the flow of criminal proceeds, the effectiveness of enforcement will also be maximized by preventing and recovering illicit gains."
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