4 CEOs offer to step down

Customer data leaks jolt financial sector

By Na Jeong-ju

• Published Jan 20, 2014 6:54 PM KST
• Updated Jan 20, 2014 6:54 PM KST

CEOs of four financial services companies offered to resign Monday over the massive consumer data leaks that have hit the local financial sector.

They are KB Kookmin Bank CEO Lee Kun-ho, KB Kookmin Card CEO Shim Jae-oh, NH NongHyup Card CEO Sohn Kyung-ik and Lotte Card CEO Park Sang-hoon. Along with Lee and Shim, all executives of KB Financial Group’s credit card and banking subsidiaries decided to step down. Eight other executives at Lotte also offered to resign to take responsibility for the country’s worst ever customer data leak.

“They have tendered their resignations en-masse to the group Chairman Lim Young-rok,” said a spokesman for KB Financial Group. “It’s not yet clear whether Lim will accept all of them.”

In addition, all executives of the Korea Credit Bureau, a private financial data provider, have decided to step down, accepting liability for the incident that may have been perpetrated by an employee.

KB Kookmin Card is one of three card firms that experienced the data theft, which may affect more than 20 million card users. The other two firms are Lotte Card and NH NongHyup Card.

“Sohn offered to resign to take responsibility for the theft case, and the company accepted his resignation,” an NH NongHyup official said.

The case couldn’t come at a worse time for KB Financial, which is still reeling from a series of high-profile corruption scandals involving its banking staff.

“Unfortunate things recently occurred at KB one after another, causing concern to many people. We hope the resignations will help produce a turnaround,” the KB official said.

Their resignations came hours after Prime Minister Chung Hong-won called for strict punishment for those responsible for the consumer data leaks.

Chung instructed Financial Services Commission (FSC) Chairman Shin Je-yoon to form a joint task force with the three firms to prevent further damage to victims, Chung’s office said.

“We must punish all those responsible for the data leaks,” Chung said. “Equally important is to map out measures to prevent a similar incident from happening again, and to reduce the damage to card users.” The Prime Minister ordered the commission to toughen regulations for data breaches so that “no one ever dares to attempt to steal consumer information.”

The instruction came amid growing public anxiety over possible financial crimes targeting card users.

The stolen data include names, addresses, phone numbers, bank account numbers and credit ratings. Some data leaked from NH NongHyup and Lotte is said to include card numbers as well as the cards’ expiration dates.

Lotte Card received a report from a customer that his card was used by a scammer in online transactions.

Some customers are also complaining that they are getting a lot more spam mail than last month.

There have been also allegations that Shin, Financial Supervisory Service (FSS) Governor Choi Soo-hyun and other top government officials are among the victims, estimated at some 20 million.

Earlier on Monday, FSS Governor Choi said the CEOs will be held responsible.

“Regardless of the outcome of our ongoing investigation, there will be strong punishment against the card firms as well as their managers,” Choi said during a meeting with senior FSS officials.

Choi also said financial groups can’t avoid responsibility for the data leaks that occurred at their card subsidiaries, indicating probes into KB Financial Group and NH NongHyup Financial Group.

“Financial groups have never apologized for this incident, nor have they showed a willingness to take responsibility. I’m disappointed at the way they responded,” Choi said.

The three card firms have become targets of public backlash.

In the face of mounting criticism, the heads of the three firms said they will compensate for all “financial and mental” damage card users have suffered from the information leaks.

“We will take full responsibility for any losses for our customers,” KB Kookmin Card CEO Shim Jae-oh said during a press conference, joined by NH NongHyup Card CEO Sohn and Lotte Card CEO Park Sang-hoon.

The firms vowed to change cards for affected users and provide free payment messaging services for all card users in an effort to counter possible crimes using the stolen data.

Card officials said the mental damage refers to stress their customers have suffered from the data leaks.

“We will discuss whether to compensate for their stress individually or set up a foundation aimed at helping victims of financial crimes,” an official said.

The information leak came less than a month after the personal data of some 130,000 customers of Standard Chartered Bank Korea and Citibank Korea was stolen.

The Financial Consumer Agency indicated that it will file a class-action suit against the banks and the card firms on behalf of the information-leak victims.

“This incident shows financial firms are only obsessed with making money while paying little attention to protecting personal information about their customers,” said Cho Nam-hee, head of the advocacy group.