To strengthen consumer protection, the financial authorities are pushing to introduce "one-sided binding force," under which financial companies must unconditionally accept the financial authorities' dispute mediation outcomes. The financial authorities recently reported to the National Assembly that they would actively support legislative efforts to introduce one-sided binding force. However, criticism that the system infringes on financial companies' right to a trial and grants excessive power to the financial authorities suggests hurdles are expected in the legislative process.
According to the financial sector on the 27th, the financial authorities recently reported to the National Policy Committee that they would actively support preparing measures to introduce the system, including case studies of one-sided binding force in advanced overseas countries and setting reasonable application standards.
Currently, a dispute mediation plan decided by the Financial Supervisory Service's Dispute Mediation Committee is a "recommendation" that takes effect only if both the financial company and the consumer agree. If either side rejects it, the recommendation loses effect, and the dispute proceeds to litigation.
When a financial dispute moves to litigation, large financial companies that hire major law firms have a higher chance of winning. Last year, the acceptance rate of the FSS's dispute mediation plans was only 47.3%. The plan is to introduce one-sided binding force to enhance the effectiveness of dispute mediation and strengthen protection for financial consumers.
A bill to amend the Act on the Protection of Financial Consumers to introduce one-sided binding force for small-amount dispute cases, proposed by Democratic Party of Korea lawmaker Kim Hyun-jung, is pending in the National Assembly. The financial authorities are reviewing a threshold of 20 million won or less as the criterion for small-amount cases subject to one-sided binding force.
Some argue, citing overseas cases that have introduced one-sided binding force, that the small-amount threshold should be raised. In the United Kingdom, the dispute mediation threshold amount subject to one-sided binding force reaches 355,000 pounds (about 67.7 billion won). The financial authorities are currently reviewing overseas cases to establish application standards.
The financial sector's reaction is negative. First, there is discontent that introducing one-sided binding force deprives financial companies of their right to sue. Some in the financial sector also say that the Lee Jae-myung administration, which sought to dismantle the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) to disperse the financial authorities' excessive power, is now granting the FSS even the role of the judiciary. An industry official said, "There are many cases where dispute mediation plans are overturned in court, so forcing acceptance should be approached with caution," adding, "the FSS is effectively saying it will play the roles of prosecutor and judge in financial dispute mediation."
The FSS said, "If legislation on (one-sided binding force) gains momentum, we will prepare and implement plans to expand dispute mediation-related organizations and personnel to vitalize the operation of the Dispute Mediation Committee and strengthen objectivity and fairness."