Hyundai Motor, KB Card reach agreement on fee in last minute negotiation

By Park Jin-hai

Hyundai Motor and KB Kookmin Card have reached an agreement Monday, ending their seven-month dispute over card fees.

The representatives of the country's biggest carmaker and the second-biggest card-issuer by market share met on Sunday and have agreed to set the fee rate at 1.5 percent.

Under the current policy, Hyundai has to return 1.85 percent of all money paid by a KB cardholder to the card company in fees.

Hyundai argued that the rate is "exorbitantly" high, demanding KB to reduce it to 0.7 percent or lower, while the card firm said it cannot adjust it below 1.75 percent, citing various costs needed to keep the policy running.

The two companies previously extended their negotiations twice, failing to find common ground due to significant differences over the terms of fees that Hyundai is required to pay to KB.

Since the rate is fixed, experts predict it will serve as a barometer for other financing institutions such as Shinhan Card and Samsung Card, whose contracts are expected to be renewed in February and March.

It is widely viewed that the two sides reached agreement since they decided that a prolonged negotiation worked adversely for both.

With credit cards being the primary payment tool for car purchases, the suspension of KB credit card use would deal a blow to Hyundai's bottom line, while KB would lose fees from transactions to buy Hyundai cars, the biggest source of income for the company.

Meanwhile, the Financial Supervisory Service has been considering adopting a rule to restrict the finance services provided by the financing units of Hyundai Motor and its affiliate Kia Motor, since it regarded Hyundai’s claim of a 0.7-1 percent fee from card issuers as evidence of an unfair business practice by the automaker because it is taking advantage of its dominance in the market.