● Financial Consumer Protection Act passed without negative votes

178 votes in favor, 0 votes against, and 2 abstentions. The Financial Consumer Protection Act passed the National Assembly in just eight years. The legislation, first proposed in 2011 at the time of the Lee Myung-bak administration, was held for a long time in the National Assembly until the regime changed three times. How did you pass the National Assembly without votes?

At the same time, the Democratic Party and the Future Integration Party decided to pass the Internet Banking Act (hereinafter referred to as the In-Bin Act) and the Financial Consumer Protection Act (hereinafter referred to as the Bank Act). Liberal Democratic Party Chae Bae strongly opposed the Internet Banking Act as a "preferential legislation for KT," but the Democratic Party initially made the In-Bin Act to pass the law. However, while the law was passed safely in the National Assembly's vote, the In-Bang Act faced an unusual situation in which it was rejected.

In addition to the agreement to pass financial-related laws at the plenary session on March 5, which could be the last chance of the 20th National Assembly, there were other factors that could be passed. This is because the content of the Bill of Laws has undergone many modifications and curtailments from the time of the first round. This article looks at how the Financial Consumer Protection Act, which had been around for eight years, was able to pass the National Assembly, what it gained and lost in the process.
● From Initiation To Pass

Following the global economic crisis in 2008, and the savings bank in 2011, the Democratic Party's law was first initiated by Park Seon-sook in 2011. But at the time, President Lee Myung-bak and Park Geun-hye did not fit the government's stance on easing financial regulations.

In the 2017 presidential election following the candlelight rally and impeachment, candidate Moon Jae-in makes a pledge to protect financial consumers. We are enacting the Financial Consumer Protection Act and pledged to establish an independent organization for financial consumer protection. He also announced that he will introduce punitive damages and class action. He vowed to take over the purpose of the law, which was first introduced in 2011.

Immediately after the inauguration of President Moon Jae-in in May 2017, the Financial Services Commission proposes the Bill of Law as a government legislation. But for two years until 2019, the law was asleep without passing the National Assembly's legislative review. In 2019, private equity accidents burst into succession, boosting the legislation of the law. This is because the DLF crisis began in August 2019, and the lime crisis began in earnest from the end of 2019. In November 2019, the Prosecutor's Law passed the National Assembly, and on March 4, 2020, the National Assembly. The Financial Consumer Protection Act was enacted in eight years, following the final session of the National Assembly on March 5, the next day.





● Eight years is the process of bill reduction

Although it bears the same 'Financial Consumer Protection Act' name, there is a big difference between the bill that was first introduced in 2011 and the bill that passed the National Assembly's plenary session in 2020. The eight years to pass the bill was a process of curtailment and pruning. Let's compare the Democratic Party's proposal in Park Sun-sook in 2011, the Democratic Party's proposal in March 2017, and the Prosecutor's Bill in 2020.

The core of Park Seon-sook's 2011 initiative to protect financial consumers after the savings bank crisis can be divided into four categories: punitive damages, collective action, conversion of burden of proof, and reform of financial oversight system. If you look at them one by one,

1. Penalty Damages System: If a seller intentionally or negligently damages a financial product such as a securities company or a bank, it is responsible for up to three times the liability.

2. Class action system: The damages related to financial investment are mostly small, and the damages are grouped so that many victims can file a class action.

3. Conversion of burden of proof: This is necessary because of the 'asymmetry of information' between financial institutions and individual investors. The lawsuit is to change the burden of proof so that the securities firm or bank, not the individual investor, proves that the financial institution did not properly describe the product. Because financial products are complex and difficult for consumers to identify, they have rarely proved and prevailed in litigation unless information is provided by financial institutions.

4. Reorganization of Financial Supervisory System: Currently, the Financial Supervisory Service is under the Financial Supervisory Service under the Financial Services Commission, which oversees financial policies. However, the FSC tends to pursue deregulation because it aims to promote the financial industry, and the Financial Supervisory Service is also in charge of supervisory work. In the 2017 presidential election, Moon Jae-in made a pledge to establish an independent financial consumer protection agency.

After attending the 20th National Assembly, lawmaker Choi Woon-yeol and Democratic Party instituted the Bill of Laws in March 2017. It included punitive damages and the transition to proof of responsibility. The class action system is not included in the bill because the Ministry of Justice is considering the introduction of a general class action system for economic activities.

The Financial Services Commission also issued a law on the law in May 2017, shortly after Moon Jae-in was elected. The government proposed an alternative by coordinating each bill in November 2019. The government did not contain punitive damages, class action, or financial overhaul. Of the four main elements mentioned above, only the transition to proof of responsibility is included.

As a result, the Financial Consumer Protection Act, which passed the National Assembly on March 5 this year, missed three of the four core elements at the time of the launch and reduced the burden of proof. Initially, the government's proposal would require financial institutions to prove their responsibility to violate compliance, adequacy, and explanation obligations. This is done. The punitive damages system, where financial institutions were liable up to three times, was eliminated, and a regulatory plan was prepared in the name of punitive penalties. However, contrary to the name punishment, even if intentional or negligence is found, financial institutions can only charge up to 50% of the income earned.

For eight years from 2011, large-scale damages to financial products such as savings banks, Tong Yang and private equity funds such as DLF have appeared, but the KOSPI Act disappeared from its core elements, leaving only detailed regulations.

● Government closer to opposition than ruling party?

Why is the law of law lessened in Congress? We reviewed the minutes of the Legislative Review.

The strongest opponent was Senator Kim Jin-tae.
(May 24, 2019. Minutes of the Legislative Assembly's Bill Review)
Kim Jin-tae, Member of the Future Integration Party
"If you've studied law, you can't instinctively like it if you punish punitive damages. The general public may be cool, but there's a legal system. In Korea, civil and criminal forms are very distinct and severely damaged. The civil law is the only way to do this. Fort DLF, DLF is a lot of things, so I want to make sure that I've got this kind of cool, but we're constantly twisting our legal system. "

"Corporate action is a bigger problem. 'Let's just benefit from those who aren't in the lawsuit.' This is against our principles of lawsuits. "I don't want to participate. Why? There can be a number of reasons. And if you lose the case, will you be liable?"

"The problem of changing the burden of proof is the same. This is basically the plaintiff's proof." It's hard to prove it, so let's change it. "And then you have to prove that there is no defendant. How do you prove a negative fact? To prove that I've done everything well from the beginning to the end of this contract, which is too far from the law of lawsuit, so I'm very opposed to those three things. . "

The Financial Services Commission was closer to the opposition than to the Democratic Party. The Financial Services Commissioner emphasized the burden of financial companies and side effects.

(May 24, 2019. Minutes of the Legislative Assembly's Bill Review)
Kim Jin-tae, Member of the Future Integration Party
"Retribution of punitive damages and proof of liability, class action. Then what is this now? (Democratic Party) It's all in the lawmakers, but the government can take it out, now?"
Son, Byung-Doo Vice Chairman, Financial Services Commission "Yes."
Kim Jin-tae, Member of the Future Integration Party, "Yes, and my opinion is negative on all three."

Byeong Do Son Deputy Chairman, Financial Services Commission
"If this law (financial consumer protection law) is right or not, right? If you ask us two things, I think it's right to enact an imperfect law right now. So there have been various opinions from various members. I've narrowed the issue, and I'd like to say that the alternatives we've made in this regard are quite a compromise between them in this regard.

"The punitive damages mentioned above is a legal system problem. As Kim Jin-tae said, this is basically an English-American law. It is not generally accepted in continental law countries. ... We consider that the burden on the industry is high. Even if we do not introduce financial consumer protection, we think that we will be able to carry out similar consumer protection issues by punitive penalties, illegal contract termination rights, subscription withdrawal rights, and restraint orders that are already included. I would like to tell you that we can achieve sufficient consumer protection even if we don't reflect punitive damages and controversy this time. "

"We've put the proof of responsibility shift here, but what do we want to target for the proof of responsibility shift? From the broadest to the narrowest. As you have said, the average consumer is relatively inferior to information or expertise. It is necessary for us to do this, but it is our government's position to introduce the minimum burden on financial companies as we have to consider it. ”

"I think it's a necessary part for the sales commission notice and consumer protection that Mr. Kim Byung-wook (Democratic Party member) raised, but we have to think about the side effects. There is a real concern that it may spread. So let's be careful when we introduce it. "

Democrats tried to pass the proposition, but had no choice but to yield.

(May 24, 2019. Minutes of the Legislative Assembly's Bill Review)
Democratic Party Member
"I'm very sorry to say this in front of the lawyer's representative (Representative Kim Jin-tae), but I think it's time to look a bit prospectively for punitive damages. I went to CES and visited American companies. Korea regulates cases on its own, and instead, it is too insignificant for damages, so advanced country regulation imposes a comprehensive form and imposes strong punitive damages. It's a good idea to make a law to prevent the recurrence of the case, but also punish damages, so the company can't afford it. Punishment going to regulatory system To introduce a remedy to solve the ultimate problem I've heard a lot of this idea. "

Lee Hak-young, Democratic Party Member
"I agree to loosen the regulations and strengthen the responsibilities. But it's not the reality that we've talked about the importance of regulations in the meantime. They're loose, they're not responsible. As long as we are free to do business, but we have to make the standard of accountability heavy enough to take responsibility for ourselves, we are going to strengthen the system that asks for punitive damages or collective action. When the DLF happened, the opposition had no responsibility for you, to the financial authorities, how did you do this? But now when you pull out the responsibilities and take off the grapes and drop off the grapes, if you can't prove the responsibility at all, The government retired too much Wo do I think. "

In the end, the compromise eliminated key elements and reduced the burden of proof.

(May 25, 2019. Minutes of the National Assembly's Plenary Session)
Byeong Do Son Deputy Chairman, Financial Services Commission
"The last time we decided to subtract, we left only the explanation obligations of fitness, adequacy, and explanation, but subtracted from fitness and adequacy. That's because we're narrowing the scope of the most evident liability transition among the various bills that you proposed. It is a shift of responsibility for proof of intention and fault. "

Min Byung-Doo Chairman of the National Assembly
"At least 11 bills related to financial consumer protection, initiated by the government and submitted by the government by Park Sun-sook, Park Yong-jin, Rep. Choi Un-yeol, Lee Jong-gal, and Min Byung-du respectively, were not submitted to the plenary session. We would like to propose an integrated co-ordination agenda, Article 29 of the Act on the Protection of Financial Consumers, to be proposed to our committee.

Eun-Sung Eun Chairman of Finance
"The Act on the Protection of Financial Consumers, which was passed by the Commission, was enacted in eight years since it was enacted in 2011. It protects consumers by strengthening the protection of consumers' rights and preventing unfair damages." We are looking forward to taking it to the next level, but we are sorry for the lack of adequacy and adequacy in the scope of the transition of proof of responsibility in the legislative discussions, but we respect the fact that the members' bipartisan cooperation has made important legislative decisions And thank you. "

● small achievements, big challenges

Punitive damages, class action, and burden of proof. This is not just an issue in the financial sector. As Representative Kim Jin-tae pointed out, it is also a matter of principle of lawsuit. For corporate and individual litigation, especially in complex and specialized areas such as finance and healthcare, there is a 'sloped playground'. It is almost impossible for a civil individual to win a lawsuit against a company that has all the information and has expertise. There are structural problems that victims have lost in many medical accident litigation, financial product litigation, and humidifier disinfectant litigation.

Punishment and regulation are not unconditional good. In the economic sector, many argue that financial institutions will not be actively invested if financial institutions shrink. This is why the Financial Services Commission was closer to the opposition conservative party than the ruling Democratic lawmakers. However, the basic regulations should be released, but the illegal part must be paid back to a healthy operating system. Attorney Kim Jung-cheol, an attorney who has been in charge of incomplete sales lawsuits for financial products, said, “The study on institutions for investor protection of financial investment products under the Capital Markets Act (2014)> In the case of the US, the financial institution's duty of investigation is emphasized, and the financial institution is asked for legal responsibility from the perspective of investor protection, while Korea emphasizes the principle of investor's self-responsibility. The Finance Chairman's "no free lunch" is a representative example of the financial authority's attitude that individual investors are responsible for their own investments.

It would be a hell for individual investors if there is a paradise for financial institutions that seek maximum returns and profits, and who are not responsible for accidents. Punitive damages, class action, and attestation liability. At the time of its inception, the three core laws of the law were not intended to be for the benefit of the financial industry, but to create a good financial system for individual consumers. The key elements didn't go into the bill that was finally passed. We could not talk about creating an independent financial consumer protection center, but only to expand and reorganize the financial consumer protection center within the Financial Supervisory Service. On the contrary, as the Southern District Prosecutors 'Office of the Securities and Crimes Joint Investigation Team disbanded, fewer institutions were required to prove financial institutions' responsibility for consumers.

Even if it is the right direction for the majority of citizens, the bill will not always pass. The bill requires that much vote and support. There is also a part that must be given through compromise with the opponent. Desperate massive damage has ironically brought momentum for institutional improvement. If it was not passed at the plenary session on March 5, the Prosecutors' Law would have been destined to be sacked again in the 20th National Assembly. An unfinished bill that had to be enacted without the big elements. The Financial Consumer Protection Act, which had a framework but paid off, passed the National Assembly. Now I have a challenge to add flesh.