Six companies suspected of issuing credit cards illegally

By Kang Seung-woo

The nation’s financial watchdog is set to take punitive action against six major credit card issuers for illegal issuances.

Once disciplinary measures are decided, the relevant firms will face stricter regulations on fresh credit card issuance and increased card loans.

According to the Financial Supervisory Service (FSS) Monday, it has found some 20,000 cases in which credit cards are believed to have been illegally issued after a two-month inspection of the six card companies in May.

The six are Shinhan, Hyundai, KB, Samsung, Lotte and Hana SK, all of which have allegedly been involved in excessive growth competition.

The FSS says defaults were attributed to the firms’ reckless card issuance to those who were not qualified or their violation of issuance requirements.

The regulator plans to get each firm’s inspection team to examine dubious cases and re-check their results before finalizing punishments for the issuers.

All six companies are likely to get disciplined, according to the FSS.

“It is likely to take two to three months to settle on penalties based on the size of issuances and the scope of wrongdoing,” said an official of the FSS.

As major card players are riddled with illegal issuance-related cases, the FSS intends to introduce tougher regulations.

The FSS is in negotiations with the top three card issuers to keep their year-on-year growth of credit advances at the 4 percent level.

Likewise, the FSS plans to cap fresh card issuance at 2 percent annually.

However, the FSS will allow small and medium-size card firms, which have shown little asset increase thus far, to beef up their year-on-year loan growth up to 8 percent.

The credit card firms’ aggressive push for asset growth has recently been a headache to policymakers, who fear that heated lending and marketing rivalry among local credit card firms are likely to pose a threat to the nation’s already-high household debt.

Last month, the FSS came up with measures to curb excessive expansion by the firms, including raising their loan-loss reserves to improve their capacity to absorb losses.

Local card issuers saw a 6.3 percent annual growth between 2006 and 2009, but it soared 14.7 percent last year, with their marketing costs jumping 30.3 percent.