South Korea: FSC To Enhance Financial Consumer Protection, Including Greater Regulatory Power Of The FSS

Last Updated: 27 January 2017
Article by Sang Hwan Lee and Keun-Chul Song

On June 28, 2016, the Financial Services Commission ("FSC") proposed the enactment of the "Act on the Financial Consumer Protection Framework" (the "Proposed Enactment").

The Proposed Enactment seeks to enhance the regulatory power of the Financial Supervisory Service ("FSS") by increasing the maximum amount of administrative fines that can be assessed, and by allowing the FSS to estimate damages suffered by financial consumers.

Below we highlight five notable features of the Proposed Enactment:

1. Financial Consumer's Right to Terminate or Revoke Financing Contracts Introduced

The Proposed Enactment provides financial consumers with the right to revoke certain financing contracts.1 Such right can be exercised by providing a written notice to the seller of the financial product (including persons licensed as a broker or agent for selling financial products pursuant to other finance-related laws) within 14 days after receiving the loan. This revocation right is intended to provide financial consumers the opportunity to reconsider the need of incurring debt, and to seek optimal financing solutions.

In addition, financial consumers may provide a written request to terminate a given financing contract within 5 years of its execution, if the seller committed mis-selling. Permissible examples include failure to provide adequate explanations, unlawful solicitation, or unfair marketing practices regarding the financial product sold.

2. Remedies for Financial Consumers Expanded

The Proposed Enactment allows financial consumers to seek remedies during dispute mediation and lawsuit proceedings by securing the consumers′ rights to receive, access, and listen to copies of the materials held by financial companies.

Furthermore, for dispute mediations involving claims of less than KRW 20 million, the Proposed Enactment prevents financial companies from separately filing another lawsuit related to the dispute mediation until such mediation is concluded.

For cases that involve claims of KRW 20 million or more, the Proposed Enactment allows courts to issue suspension orders for the lawsuit proceedings in the event that such proceedings are conducted simultaneously with the dispute mediation procedure.

Regarding lawsuits for damages related to mis-selling, the Proposed Enactment partially shifts the burden of proof to financial companies – companies are required to prove that they did not commit gross negligence or willful misconduct in light of suitability and appropriateness of the financial product sold, and their obligation to provide adequate explanation thereof.

3. Regulations and Sanctions Related to the Sales of Financial Products Expanded

The Proposed Enactment strengthens regulations related to the selling of financial products, and increases the level of sanctions that can be imposed on financial companies for violating such regulations.

The Proposed Enactment requires the application of the principles of suitability and appropriateness with respect to the financial product sold, even for loan-type products.

It also expands the seller's obligations to notify and explain, as well as the scope of unfair sales activities that are prohibited.  A financial company may be subject to an administrative fine of up to 50% of its revenues that was generated from engaging in sales activities that are in violation of the Proposed Enactment, and the financial consumer may also terminate the relevant contract.

Additionally, the FSS may prohibit the sale or solicitation of certain financial products, if such a sale or solicitation can result in monetary damages to financial consumers.

4. Pre-Sale Disclosure Obligations to Financial Consumers Expanded

The Proposed Enactment expands the scope of information that must be provided to financial consumers in the sales of financial products.

Under the Proposed Enactment, the FSC may make information publicly available, in which the regulator compares the major terms of financial products in each category.

The FSS may evaluate individual financial companies′ status regarding consumer protection, and may publicly issue its findings.

Furthermore, financial companies are obligated to inform financial consumers of any compensation (including commissions and remunerations) that the seller of the financial product paid out to sales agents, brokers, and consultants in connection with the sale of financial products.

5. Regulatory Requirements for the Sale of Financial Products Now Classified by Product Function (4 Types)

The Proposed Enactment classifies financial products and their services into four types according to their practical functions.

Specifically, these four types are: (i) deposit-type products (products that guarantee the principal investment amount, such as time deposits); (ii) investment-type products (products that do not guarantee the principal investment amount, but generate return on the investment); (iii) insurance-type products (products that pay out insurance payments for certain insured events after the policyholder have paid insurance premiums for a long period); and (iv) loan-type products (a financial company provides a loan and the borrower repays the principal amount of the loan and accrued interest thereon).

The Proposed Enactment prescribes a different set of regulations for the sale of each type of financial product based on several factors, including the principles of suitability and appropriateness for each relevant financial product, explanatory obligations, and regulations on advertisement.


1. The enforcement decree of the Proposed Enactment will set out the applicable financing contracts, which will include loan contracts

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions