The Korea Fair Trade Commission uncovered numerous unfair clauses in the terms used by online investment brokerage firms that shift investment risks to customers or grant excessive authority to terminate contracts.
On the 29th, the Korea Fair Trade Commission (FTC) said it reviewed 1,754 clauses across 68 sets of terms used by 34 online investment-linked finance businesses and requested corrective action from the Financial Services Commission (FSC), determining that 281 clauses in 11 categories violated the terms and conditions law. The review covered the terms of companies currently in operation that were enacted or revised from Aug. 27, 2020, after the Online Investment-Linked Finance Business Act took effect, through Mar. 7 this year.
The Korea Fair Trade Commission (FTC) determined that clauses shifting responsibility for managing investment limits to customers were problematic. The Online Investment-Linked Finance Business Act assigns businesses the responsibility to manage compliance with investment limits through the central record-keeping agency. Nevertheless, some terms stated that "if an investor violates the linked investment limit and the company suffers damage, the investor bears civil and criminal liability." The Korea Fair Trade Commission (FTC) judged this to be invalid under the terms and conditions law because it shifts risks that the business should bear onto customers.
Many clauses were also found to define grounds for contract termination in excessively broad terms. Some terms listed abstract expressions such as "acts that run counter to what the company has set" as grounds for termination and allowed the company to terminate the contract if the customer did not comply with corrective requests. They went further by including exculpatory clauses stating the company bears no liability for damages arising from termination. The Korea Fair Trade Commission (FTC) determined these clauses were unfairly disadvantageous to customers.
Clauses requiring joint guarantees not permitted by law were also flagged. The Financial Consumer Protection Act allows joint guarantees only in limited cases, such as co-representatives or chief executive officers, but some terms went beyond that scope and allowed demands for joint guarantees from third parties. The Korea Fair Trade Commission (FTC) also viewed this as an unfair term.
In addition, the Korea Fair Trade Commission (FTC) judged the following as "unfair clauses": ◇ clauses allowing collateral to be satisfied in abstract ways ◇ clauses deeming important notices delivered after being sent by regular mail ◇ clauses restricting customers' rights of defense ◇ jurisdiction clauses unfavorable to customers ◇ clauses that do not obtain sufficient consent on important matters.
The Korea Fair Trade Commission (FTC) said it expects this action to prevent investor harm caused by unfair terms in the online investment brokerage sector. An official at the Korea Fair Trade Commission (FTC) said, "We will continue to monitor, in cooperation with the financial authorities, to ensure that unfair terms are not used in financial transactions," adding, "We will make sure identical or similar unfair terms are not repeated."