The Financial Services Commission is to propose a bill banning financial companies from filing suits against customers if the disputes are over a “small” amount of transactions.
The bill is expected to define small-amount dispute cases as those whose transactions do not exceed 5 million won ($4,600).
While the FSC said the bill will be designed in coordination with relevant ministries, the regulatory body is seemingly considering proposing the bill to the National Assembly during the second half of the year.
Around 20 percent dispute cases filed with the Financial Supervisory Service, an executive arm of the FSC, refer to transactions less than 5 million won.
The bill is likely to prevent financial customers from taking a heavy burden to defend frequent lawsuits from the financial industry such as insurance companies and credit card issuers.
An issue is how the FSC will cope with backlash from financial companies over the move.
Further, the FSC is poised to stipulate a clause in the bill that financial companies are also barred from suing customers if the dispute had already been settled by arbitration of regulators.
Over the past few years, steps have been taken to make decisions made by the “Dispute Arbitration Committee” in the FSC and FSS involving disputes over small amounts of money legally enforceable.
The measure has entitled regulators to resolve a considerable portion of financial disputes, which may prevent unnecessary legal action and cut costs, thereby protecting consumers’ rights.
The FSC has pushed ahead with the system granting unilateral legal enforceability to decisions by the committee on financial disputes involving small amounts.
Unilateral legal enforceability means that while a financial institution cannot file a legal complaint against financial authorities’ arbitrary decisions, financial consumers are allowed to protest such decisions and file lawsuits with the court if unsatisfied with such decisions.
The committee is a pseudo-legal authority that was established under the FSC to help arbitrate disputes between financial consumers and institutions promptly and equitably in accordance with legislation pertaining to the establishment of the FSC.
The committee was established in consideration of the reality that financial consumers are an economically disadvantaged group that cannot afford to resolve disputes through negotiations on an equal footing with financial institutions, which are armed with organizational power and professionalism, or through legal proceedings, which require long periods of time and major expenses.
However, decisions by the committee are not legally binding, and hence if one of the two parties concerned defies the decisions, it could seek a lawsuit, rendering the purposes of the organization effectively meaningless.
Other developed countries, including Britain, Germany, Australia, Canada and Singapore, reportedly have been adopting similar systems in recent years.
By Kim Yon-se (email@example.com