Financial authorities are stepping up to overhaul the penalty calculation system under the Credit Information Act.

This follows criticisms that the level of penalties for violations of the Credit Information Act has been excessively high. Authorities have decided to reflect the characteristics of violations and subdivide the imposition rates in the calculation standards to enhance the rationality of sanctions.

The Financial Services Commission (FSC) held a task force (TF) meeting today (September 16) chaired by Yoo Young-jun, Director General for Digital Finance Policy, to discuss improvement measures for calculating penalties under the Credit Information Act.

It appears that the authorities are pursuing this amendment in response to criticisms that the level of penalties for violating the Credit Information Act is too excessive.

Recently, the FSC finalized a penalty of approximately 7 billion won regarding Tongyang Life Insurance's violation of the Credit Information Act. This was significantly reduced from the 140 billion won initially calculated by the Financial Supervisory Service (FSS), sparking controversy over the authorities' penalty calculation system.

Previously, through the amendment of the Credit Information Act in 2020, financial authorities expanded the scope of penalties and substantially raised the upper limit of imposition from 3% of related sales to 3% of total sales.

However, criticisms have persisted that inspection and sanction regulations for financial institutions applied across the entire financial sector are applied as-is, failing to reflect the specific characteristics of Credit Information Act violations.

The current regulations apply to all sectors, and the evaluation items for the severity of violations are also composed mainly of general items.

On the other hand, the Personal Information Protection Act and the European Union's General Data Protection Regulation (GDPR) take into consideration the types of personal information as well as the scale of damage and impact on data subjects.

In particular, critics point out that when calculating penalties under the Credit Information Act, a three-stage imposition rate (50-75-100%) is applied, and total sales are used as the basis, making it difficult to calculate penalties proportional to specific violations.

The Personal Information Protection Act and the GDPR impose penalties based on related sales and worldwide sales, respectively, while securing proportionality by applying imposition rates of 1% to 30% and 0% to 10% for minor violations.

The Act on Corporate Governance of Financial Companies also sets an imposition rate of 1% to 30% for such cases.

Financial authorities and financial sector associations share the consensus that separate penalty calculation standards reflecting the characteristics of the Credit Information Act are necessary to enhance the transparency, predictability, effectiveness, and rationality of sanctions.

In particular, they gathered opinions that when evaluating the severity of a violation, the characteristics of Credit Information Act violations should be reflected, and the imposition rates in the penalty calculation standards should be subdivided.

In addition, aggravation and mitigation measures were also discussed.

Financial authorities stated, "Based on opinions gathered from the financial sector, we plan to prepare penalty calculation standards to enhance transparency and rationality, and promptly proceed with regulatory amendments."

(Photo: Provided by the Financial Services Commission, Yonhap News)