Card issuers to take legal action against Visa

By Nam Hyun-woo

Korean credit card firms said Wednesday they are considering legal action against Visa’s “unilateral” commission raise.

The firms held a meeting to respond to the card issuer’s move, agreeing they will strongly oppose the fee hikes and come up with actions including sending another letter of complaint to Visa headquarters and taking legal action. For that, they will appoint a law firm.

The move came after eight domestic card firms sent a joint letter of complaint last month to Visa which notified local firms in April of its planned fee hikes starting in October of this year.

In its April notification, Visa said it would raise fees on six types of overseas services beginning Oct. 1. The hikes range from 10 to 100 percent.

This will burden not only domestic card firms but also consumers as the hike includes international service assessment fees, which card holders pay when they purchase goods outside of the country. Currently, customers holding cards issued by Korean issuers pay a 1 percent fee, but the notification forces customers to pay a fee of 1.1 percent -- a 10 percent rise.

The domestic card issuers disputed that Korea is the only Northeast Asian country where Visa wants to raise fees.

On June 24, the eight firms sent the letter to Visa Korea. In the letter, they demanded the reasons for the “discriminative” fee policy and withdrawal of the fee hikes. They also asked Visa to consent before making “significant decisions,” not to unilaterally notify them.

Visa replied on July 1 through the Credit Finance Association that the company will inevitably raise the fees due to “increased facility investments in Korea.” Instead, Visa said it will postpone the timeframe of a hike in international service assessment fees, which card holders pay when they purchase goods outside of the country, from October to January this year.

“Visa’s letter implies that the company has no intention of changing its unilateral notification, forcing local companies to come up with stronger reactions,” said a domestic card firm official asking not to be named.

Despite criticism that Visa is “abusing its power,” the commonly held view is that the issue is a matter “between players” and it will be hard to expect arbitration from a third party because contracts between domestic firms and Visa state that the latter decides the commissions and then notifies the former. Also, market insiders expect that arbitration may cause a trade conflict between Korea and U.S.

A Visa Korea official said that the company’s stance is represented in the July 1 reply and refused to make additional comments.