A chief executive officer (CEO) views the company with a “wide eye” that handles tasks covering overall administration and major corporate decisions. CEOs of financial companies, in particular, have the responsibility to manage the sales of finance products for corporations and individual consumers. From now on, such CEOs of financial companies have one more agendum to take care of – to be in charge of financial consumer protection.
On July 11, the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) of South Korea announced the amendment of the Financial Consumer Protection Model Guideline. The most distinctive change to the guideline was the strengthened role of financial companies’ CEOs in securing consumers’ rights. CEOs were to take the place of the chairperson in the Financial Consumer Protection Council, which signified that CEOs will now be more involved in the council, not merely exchanging information as in the past.
The amendment is certainly a positive reform, well reflecting the need for a strengthened method to protect consumers. It primarily accentuates that CEOs of finance companies need not solely to focus on increasing profit, but also to strive for protecting the rights of consumers. Such change was necessary as there have been constant cases where consumers were at a disadvantage due to asymmetric information. According to research done by FSC and Gallup Korea in 2018, consumers felt that they were frequently at an inferior position compared to financial companies, often times unaware of individuals’ rights or requirements needed for products. Now, with the head of the company in charge of consumer protection, such cases will be prevented through examinations in economic, legal, and moral aspects.
In contrast, concerns behind the guideline are raised in the field of finance as well. Due to a change in task delegation and a substantial increase of inspections and examinations, additional costs are expected. However, the advantages are to outweigh the costs when viewed in the long term with the active participation of CEOs. By establishing the infrastructure for finance companies to prioritize consumer protection independently, such implementation can effectively create a sustainable ground in the finance market.
Furthermore, the importance of an enhancement in financial consumer protection aligns with the statement announced by the Organization for Economic Cooperation and Development (OECD) – “an effective consumer protection measure will promote efficiency and stability to create positive outcomes for both financial institutions and their customers.” As such, the guideline is a necessary step for consumers to understand the process and the results of a financial product, hopefully facilitating a healthy communication in the market.
The amendment reflects the need for companies to administrate the tasks more centered toward consumers, rather than being strictly concentrated on the companies themselves. As the guideline holds an influential role in the financial market, the government and the companies must endeavor to successfully implement the amended guideline to reality. CEOs are now obliged to take an active role in taking care of the consumers, opening their ears to consumers’ voices and further rearranging protection systems. As a rudimentary basis for effective financial consumer protection, the reformed guideline should be the first step to reach a harmonious relationship between companies and consumers.