Financial Services Commission to Overhaul 'Fossilized' Credit Information Consent System... Boosting Alternative Credit Assessment

Rationalizing Data Utilization Regulations for the AI Era
Expanding Inclusive Finance by Improving Access for Thin File Individuals

The government has begun a comprehensive overhaul of the personal credit information consent system, which has been in place for over 30 years, to align with the era of artificial intelligence (AI). The aim is to relax excessive prior consent regulations that hinder the use of data in the financial sector, thereby facilitating the financial industry's AI transformation and alternative credit assessment, as well as improving financial accessibility for 'thin file' individuals with limited credit history to expand inclusive finance.

On June 16, the Financial Services Commission held a kickoff meeting of the "Legal Advisory Group on the Reform of the Personal Credit Information Consent System" at the Government Complex Seoul, chaired by Vice Chairman Kwon Dae-young, to discuss the direction of the reform. The advisory group consists of domestic and international legal and academic experts in data law.

Vice Chairman Kwon stated, "The personal credit information consent system has been operated in an overly strict and rigid manner, and as a result, it has failed to effectively protect the data autonomy of financial consumers." He added, "There is a need to fundamentally reconsider the outdated regulations that have remained in place for more than 30 years." He further emphasized, "We will improve the system to support the creation of inclusive and productive value in the financial sector through the safe use of data, while also ensuring the substantial protection of financial consumer rights."

The current personal credit information consent system, introduced in 1995 when the Credit Information Act was enacted, has seen continuously strengthened regulations. As a result, individual and prior consent is required in principle at every stage, including the collection, use, provision, and inquiry of information. This has led to criticism that financial institutions require an excessive number of consent forms and that financial consumers bear all the responsibility in the information processing process.

The financial sector also faces significant challenges in obtaining financial consumers' consent, which has made it difficult to develop and launch AI and data-driven services.

As data utilization expands in the future, it is expected that alternative credit assessments using non-financial information will become more sophisticated, which will expand financial offerings for thin file individuals such as young people, newcomers to society, and homemakers who lack sufficient financial history.

Accordingly, the Financial Services Commission has determined that it is necessary to make the consent regulations under the Credit Information Act more flexible. The Commission also took into account that major countries such as Japan and the European Union (EU) are easing regulations on the use of personal information to foster their AI industries and enhance global competitiveness.

For example, the EU last year pursued regulatory reforms to recognize the use of personal information for AI development as a "legitimate interest" of data processors. Japan is also promoting amendments to its Personal Information Protection Act to introduce special provisions for the use of personal data for AI development purposes.

The Financial Services Commission plans to refer to these overseas legislative trends and revise Korea's Credit Information Act framework to align with international standards. Through further discussions with the legal advisory group, the Commission will develop specific reform measures and seek input from financial consumers, the financial sector, and experts before pursuing amendments to the Credit Information Act.

This content was produced with the assistance of AI translation services.