Credit Card Measure Is Set to Take Effect

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Credit Card Measure Is Set to Take Effect

The Financial Supervisory Commission announced Thursday a long-awaited measure to improve the credit card business, which is scheduled to take effect in June.

Under the measure the government will allow companies and banks to start new credit card businesses as early as the end of the next 60-day period. Since 1989, the government has strictly banned new entries in the credit card market to avoid overheated competition.

To enter the market in June, banks' ratio of net worth to total capital must exceed 10 percent and companies' debt ratio must be less than 180 percent. Private companies wishing to participate in the credit card business should have equity capital of more than 80 billion won ($61.8 million), a minimum of 300 employees, more than 30 branch offices and more than 150,000 customers for financial products if they are already engaged in the financial industry.

As a part of the new measure, the Financial Supervisory Service and consumer protection organizations will analyze the pricing policy of fees for credit card cash advances. The public has criticized the 18 to 29 percent annual interest rates on cash advances as too high. According to government data, credit card firms earned 157 trillion won, or 66 percent of their revenue last year, from cash advance services and credit card loans.

The government agency will urge the companies to apply different levels of service charges according to the credit records of individual customers. It will also strictly punish any price collusion on the service fees. "We expect that credit card companies soon will lower their fees for cash advances to 10 percent," said a source from the Financial Supervisory Commission.




by Huh Kwi-sik

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