gettyimagesbank

The government began drafting regulations to curb deceptive tactics used in the online sale of financial products, according to industry officials, Thursday. This addresses growing concerns that some financial companies engage in unfair practices, such as pushing product sign-ups within their apps or making cancellation processes unnecessarily complex.

Financial authorities have commissioned related research from the Korea Financial Consumers Protection Foundation (KFCPF) and are gathering industry opinions before introducing relevant regulations, the officials said.

These measures follow the amended E-Commerce Act, which bans deceptive sales tactics and takes effect on Friday. However, since financial products are not covered under this act, the authorities have been working on separate regulations. The current Act on the Protection of Financial Consumers primarily governs face-to-face sales practices, leaving ambiguities in its application to online transactions.

Deceptive sales tactics have been increasingly prevalent in the financial sector.

For instance, when signing up for financial products or services, additional options — such as subscriptions — are often pre-selected by default. In some cases, canceling a product or service requires multiple confirmation steps or lacks a direct cancellation option, forcing consumers to contact customer service to complete the process.

In the case of deposit and loan products, companies have been criticized for concealing unfavorable information in their apps, such as displaying only the maximum interest rates without indicating the effective rates.

In the insurance sector, some insurers have reportedly been collecting personal information, such as names, resident registration numbers and phone numbers, under the pretense of offering insurance premium comparisons, only to use the data later for telemarketing.

The Financial Services Commission (FSC) first outlined plans to establish guidelines on this issue in 2024, but progress has been delayed due to differing opinions among stakeholders.

The biggest challenge lies in defining the regulatory approach and scope. There are concerns that excessive restrictions on companies' sales activities could hinder non-face-to-face financial services, potentially inconveniencing consumers.

The FSC plans to introduce guideline-level regulations first, and explore potential legal amendments to the consumer protection act later.

"From a financial company's perspective, leveraging consumer behavioral biases may be considered an innovative marketing strategy. However, some practices can negatively impact consumers, raising consumer protection concerns," KFCPF research fellow Lee Jeong-min said.

"Financial authorities should continuously measure the impact of their digital interaction strategies when they collect data from financial companies on investor behavior and outcomes."