Regulator inspects card firms ahead of fee reduction

By Lee Kyung-min

The Financial Supervisory Service (FSS) is looking into the country's eight credit card issuers over compliance issues, the regulator said Tuesday.

The firms are KEB Hana, KB Kookmin, Lotte, Samsung, Shinhan, Hyundai, Woori and BC.

FSS officials plan to conduct a seven-day investigation into each firm, although the period will be shorter for smaller firms. The overall process will continue through Dec. 21.

The financial regulator said they will review whether the eight firms' business practices have been in compliance with a memorandum of understanding (MOU) signed in 2016.

Under the agreement signed with the FSS, the firms were to refrain from engaging in “inappropriate” marketing for debt cancellation and debt suspension (DCDS) services and for landing new card subscribers.

DCDS is a controversial marketing scheme whereby telemarketers sell insurance-like products using a jargon-filled contract language to confuse consumers into subscribing to the program without having fully informed them about monthly commission fees.

The MOU also stipulates that the firms maintain reasonable policy concerning setting and managing interest loans as well as tightened monitoring on consumers personal data.

Also under scrutiny is whether the year-on-year increase of credit card-backed household loans has been kept below 7 percent.

All firms except BC reported that they saw an average of 16.7 percent increase from a year earlier as of the first half of 2018, leaving little room for them to continue “aggressive marketing” to offer new loans to customers.

Meanwhile, the investigation comes ahead of the government's plan to lower transaction fees by up to 1 trillion won ($875 million), indicated earlier by Financial Services Commission (FSC) Chairman Choi Jong-ku.

He said in October that a more proper way of fee-setting measures set to be unveiled in November will ensure the beneficiaries equitably shoulder the burden, indicating substantial reduction will follow in fee for card issuers and services for consumers.