The financial authorities are expanding the consumer protection framework for non-deposit products in the banking sector from the post-sale phase to the product selection and review stage. This initiative aims to prevent large-scale consumer losses caused by complex financial products by thoroughly examining risks and consumer suitability before the products are sold.
The Financial Supervisory Service (FSS) announced on the 30th that it discussed the 'Improvement Plan for Non-Deposit Products in the Banking Sector' during the fourth Financial Consumer Protection Advisory Committee meeting, chaired by FSS Governor Lee Chan-jin, on the 27th.
The core of this improvement plan is to enhance consumer protection from the product selection and review stage before banks sell non-deposit products. This change follows the incidents involving derivative-linked securities (DLF) and Hong Kong H-index linked securities (ELS), which previously focused on post-sale management.
First, the responsibilities for consumer protection between the manufacturers and sellers of external products will be clarified. High-risk products, such as complex financial investment products and overseas alternative investment funds, will undergo reviews involving external experts and manufacturers. Additionally, the pre-review process by independent departments, including risk management, consumer protection, and compliance, will be strengthened.
Post-sale management will also be enhanced. The explanations regarding losses related to ELS will be made more specific, and the frequency of updates for high-risk products will be reduced to at least once a month. Furthermore, information on fees and repayment conditions will be expanded to improve consumers' ability to compare and choose products. Employees selling non-deposit products will be required to complete pre-training provided by manufacturers.
The FSS plans to incorporate these improvements into the 'Internal Control Best Practices for Non-Deposit Products in Banks' after soliciting public feedback in the second half of this year.
Discussions also included measures to combat insurance fraud, respond to online fraudulent payments, and improve the marketing consent system for credit card companies. The FSS intends to conduct focused investigations into suspected hospitals and clinics involved in insurance fraud, deploying approximately 100 members from the Special Investigation Unit (SIU) of insurance companies to collaborate with relevant agencies.
Regarding online fraudulent payments, the FSS is working on establishing minimum functional requirements for the abnormal transaction detection systems (FDS) of payment gateway companies and applying AI and machine learning-based detection models. The introduction of a risk-based authentication system, including mandatory multi-factor authentication for high-risk transactions, is also under consideration.
The marketing consent system for credit card companies will be improved to distinguish between consent for services and benefits related to card products and non-card products and services. Consumers will be made more aware that they can withdraw consent or request the cessation of advertisements at any time after giving consent.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.