The Financial Services Commission has begun work to amend the Act on the Protection of Financial Consumers to strengthen protections for financial consumers in step with the expansion of online sales of financial products and the introduction of artificial intelligence (AI). It is the first time in five years since the law took effect in Mar. 2021.
According to the financial authorities on the 13th, the Financial Services Commission (FSC) is conducting a research project to revise the law in line with changes in the financial environment, such as advances in digital technology. The aim is to respond to the changed environment since the law took effect, including the expansion of online-centered sales of financial products and increased use of AI.
The Financial Services Commission (FSC) said there are views that a review is needed on whether the related regulatory framework is suitable as online-centered sales of financial products surge. The FSC will examine how domestic financial companies conduct sales of financial products using online channels and AI, and will draw up legal amendments accordingly. It will also identify cases where additional regulation of sales conduct is needed in specific financial transaction processes. It plans to review which parts of current guidelines run as self-regulation, such as online explanation duty guidelines, need to be codified.
The core of the law is that six sales principles—suitability, appropriateness, duty to explain, prohibition of unfair business conduct, prohibition of improper solicitation, and prohibition of false or exaggerated advertising—apply to all financial products. Financial companies that violate these principles can face a "punitive penalty surcharge" of up to 50% of the related revenue.
Academia and the financial sector have long noted that while the fusion of AI and the financial industry is progressing rapidly, consumer protection measures such as the law are not keeping pace.
Kim Eun-jeong, a senior research fellow at the Korea Legislation Research Institute (KLRI), said, "AI is spreading into credit assessment, asset management, and automated transactions in the financial sector," and noted, "There needs to be a legal framework to prevent consumer harm arising from data bias and algorithmic opacity."