The Financial Supervisory Service (FSS) is pursuing measures to preemptively halt sales of fund and insurance products deemed likely to cause significant harm to consumers. The regulator plans to revise the system to allow complete nullification of contracts—even for products already sold—if large-scale consumer damage is anticipated. Additionally, the FSS will establish a new consumer protection oversight division directly under the FSS Governor and set up a task force to introduce special judicial police for eradicating financial crimes affecting public livelihood, including voice phishing and illegal private lending.
The FSS announced its "Financial Consumer Protection Improvement Roadmap" containing these measures on January 22.
The regulator plans to strengthen consumer protection across the entire financial product lifecycle—from product design and manufacturing to sales and post-sale management. It will impose advance sales restrictions on financial products expected to cause large-scale consumer harm. Notably, for products already sold, the FSS is reviewing whether to apply the rules retroactively to nullify contracts from inception when necessary.
"Consumer harm can occur even with products already sold," said Lee Se-hoon, Senior Deputy Governor of the FSS. "In such cases, nullifying contracts from inception may be necessary, and we will not rule out this option."
The FSS has decided to strengthen consumer protection measures starting from the product design and manufacturing stage. The creation of high-risk products will require review by external experts, and financial institutions will be required to establish measures to prevent risks arising from third parties such as medical institutions. Product screening will also be strengthened. For example, when insurers introduce new coverage for new medical technologies, they must file advance notifications, and coverage limits by product must be stated in basic documentation.
Measures to reduce financial costs for consumers are also being pursued. Starting as early as next year, the FSS will push to lower interest rates by removing deposit insurance premiums from savings bank loan rates. The regulator also plans to develop system improvements for settlement-type credit products with seller recourse rights, such as accounts receivable-secured loans and seller loans.
Consumer transaction convenience will also be enhanced. The system will be improved to allow dementia patients to conduct financial transactions through family members. Notification and replacement issuance procedures when credit cards are discontinued will be revised to increase consumer choice. New special provisions to rationalize own-vehicle damage compensation standards in auto insurance and measures to offer lower loan rates when small business owners complete education programs are also being pursued.
On the same day, the FSS announced an organizational restructuring plan to establish a consumer protection oversight organization (headed by an assistant governor) directly under the FSS Governor. The key feature is the merger of the consumer protection division—previously under the Financial Consumer Protection Bureau—with supervisory oversight functions. Under the consumer protection oversight division, the FSS created the Consumer Protection Supervision Bureau, Consumer Harm Prevention Bureau, and Supervision Innovation Bureau, in addition to the Supervision Coordination Bureau that oversees supervisory and examination work.
The insurance division, previously under the Senior Deputy Governor, has been placed under the Deputy Governor for Public Livelihood and Insurance (head of the Financial Consumer Protection Bureau). This reflects the fact that insurance generates the most dispute-related complaints among financial sectors. Another feature of this reorganization is that sector-specific product and policy departments will handle dispute mediation functions.
A task force will be created to introduce special judicial police for public livelihood financial crimes, pursuing the establishment of a separate investigative organization following the capital markets special judicial police. The public livelihood special judicial police are expected to be granted independent investigation authority upon introduction.
Regarding phase-two virtual asset legislation, the FSS will establish a "Digital Asset Basic Act Preparation Team" (tentative name) and add two market surveillance teams to strengthen monitoring of unfair trading in capital markets.
Sources inside and outside the FSS suggest that appointments for deputy governors and assistant governors may be finalized as early as January 25. Industry observers largely expect Senior Deputy Governor Lee to remain in his position.
Meanwhile, the FSS announced it began an examination of BNK Financial Group on January 22, moving up the schedule following controversies surrounding the group's chairman selection process.
