New Credit Card Firms Are Facing Tighter Rules

The Finance Ministry said Sunday that new credit card companies will be subject to stricter government regulations The planned amendments to current laws will require firms starting a credit-card business to submit proposals detailing plans for the first three years of operations.

Under the proposed changes no part of the new credit card company's capital can be borrowed funds, and corporations establishing a card company will be required to have shareholders' equity equal to or greater than three times the capital invested in the new entity. The establishing corporation also cannot have a debt-equity ratio greater than 300 percent.

The amendment allows credit card firms to revoke membership agreements with retail businesses and restaurants that repeatedly charge customers additional fees for credit card use or refuse to accept credit cards. Under current law the membership of a company can be cancelled only if it has been convicted of crimes.

The ministry also proposed rules on mutual savings and finance companies that will allow them to market pension plans, government bonds and gift certificates.

The amendments provide for credit card companies and mutual savings companies to be added to the list of companies required to have outside directors. Credit card companies with assets of 2 trillion won ($1.5 billion) or more and mutual savings firms with at least 300 billion won in assets will be required to have outside directors.

by Song Sang-hoon