The Financial Services Commission is reported to have drastically reduced the penalty imposed on Dongyang Life for violating the Credit Information Act, from an initial 1.4 trillion won to the 100 billion won range. This move allows Dongyang Life to avoid a penalty exceeding its annual net profit last year. The financial authorities are also considering improvements to the excessive penalty imposition system under the new law.
According to the financial sector on the 8th, the Financial Services Commission is scheduled to hold a regular meeting on the 9th to deliberate on sanctions against Dongyang Life for violating the new law. Prior to the regular meeting, the agenda review subcommittee decided to drastically reduce the penalty imposed on Dongyang Life to the 100 billion won range.
The penalty imposed by the Financial Supervisory Service about a year ago was 1.4 trillion won, exceeding Dongyang Life's net profit of 120 billion won last year. This amount reached approximately 10% of Woori Financial's acquisition price for Dongyang Life, leading to criticism that Woori Financial effectively lost the deposit for the Dongyang Life acquisition contract. The Financial Supervisory Service discovered during a 2022 inspection of Dongyang Life that personal credit information had been transferred to its subsidiary GA (insurance agency) without customer consent and held a sanctions review committee last year, ruling it as a violation of the new law.
The Financial Services Commission, having received the results of the Financial Supervisory Service's sanctions review, conducted a separate legal interpretation review committee meeting before holding the regular meeting, followed by discussions in the agenda subcommittee. It is reported that during this process, it was determined that personal credit information transferred to the GA subsidiary falls under business entrustment and differs from situations where personal information is illegally transferred to third parties. This is the decisive reason why the 1.4 trillion won penalty imposed by the Financial Supervisory Service has been drastically reduced to the 100 billion won range.
Members of the Financial Supervisory Service's sanctions review committee also viewed that the initial 1.4 trillion won penalty was excessive, considering the extent and motive of Dongyang Life's violation as well as the degree of harm suffered by individuals. However, according to the Financial Supervisory Service's inspection and sanction regulations, the maximum reduction rate it can apply is only 50%. This is because the law requires selecting between 50%, 75%, or 100% of the base penalty depending on the severity of the violation. While separate reduction standards in individual laws may be applied, the new law does not have differentiated rates. The new law stipulates that the base penalty shall be set at "3% of sales." Even applying the maximum reduction rate of 50% available to the Financial Supervisory Service results in a structure where a 1.4 trillion won penalty is imposed.
The financial sector criticizes this penalty assessment standard under the new law as excessive, calling it a representative example of "strict administrative punishment." In fact, laws such as the Financial Consumer Protection Act and the Personal Information Protection Act allow for differentiated reduction rates ranging from 1% to 100%, enabling penalties to be imposed at varying levels based on violation motives and the degree of harm.
The issue is that Shinhan Life and Lina Life, like Dongyang Life, were also caught by the Financial Supervisory Service for transferring personal information without customer consent. These insurance companies are also facing sanctions from the Financial Supervisory Service. In the case of Shinhan Life, applying the Financial Supervisory Service's maximum reduction rate of 50% based on last year's sales could result in a penalty exceeding 2 trillion won. Currently, under existing regulations, the Financial Supervisory Service has no choice but to impose record-breaking penalties similar to those against Dongyang Life, leaving the Financial Services Commission with the task of reconsidering reductions such as minor adjustments.
Consequently, there are calls for the need to further subdivide penalty assessment standards through amendments to the new law and other measures. It is reported that financial authorities are considering improving the penalty imposition system under the new law, similar to the Personal Information Protection Act or the Financial Consumer Protection Act. However, with a series of personal information leakage incidents occurring socially recently, concerns are also being raised that improvements to the penalty system could be perceived as "favoritism."
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