Financial regulators are set to crack down on irregular business practices committed by financial service companies to help prevent consumers from being bullied.
The supervisory policy toward enhanced consumer protection comes after angry citizens recently criticized an employee of Namyang Dairy Products for verbally abusing a wholesaler in the manufacturing sector.
The irregular practices in the financial sector include commercial banks allegedly demanding unreasonable conditions in loan issuance and credit card or capital services firms’ blackmailing of delinquent borrowers, said an official of the Financial Supervisory Service.
He said among other regulatory targets are insurance companies’ sales activities without informing consumers of exact terms and savings banks’ lending on excessively high interest rates.
As an initial step, the FSS has bolstered the authority of its executive arm, the consumer protection and deliberation board.
In addition, the Financial Services Commission, the decision-making entity of the FSS, plans to carry out intensive inquiries into prevalent irregular practices by “launching a task force for consumer protection” in the coming months.
Despite continuous oversight of the FSS and FSC, some commercial banks pressured many individual and corporate customers to purchase insurance products or investment funds in exchange for issuing loans.
Due to the irregular lending, many borrowers saw losses from high-risk fund investments or are now faced with paying unnecessary insurance premiums, according to FSS officials.
The regulator is considering introducing clarified legal grounds to take more stern disciplinary measures on rule-violators. It also plans to raise the penalty ceiling for banks engaged in irregular lending from the current maximum of 50 million won ($45,400).
Meanwhile, some banks have been accused of raising interest rates on loans to the corporate sector via dubious practices.
Some banks allegedly ignored lending terms and raised the rates on loans to small and mid-sized enterprises. The hikes conducted by one bank ranged between 0.2 and 0.7 percentage point, and the number of irregular cases has reached 6,300 over the past few years.
An FSS official said one lender overcharged SMEs by 18.1 billion won ($16.7 million), adding that the regulatory body has ordered it to reimburse the borrowers the overcharged interest.
By Kim Yon-se (
kys@heraldcorp.com)
