[EDITORIALS]The problems of plasticFinancial regulators are stepping up their efforts to put practices of local credit-card companies under control. The Financial Supervisory Service plans to launch a major examination of all credit-card firms about their card issuances. The Korea Fair Trade Commission, which has been investigating the suspected collusion among card firms on commission fees, said that it would take punitive actions, including levying fines, against those firms.
Such a crackdown has been predicted because the recent rapid growth of the local credit-card industry has produced a slew of evil effects. In fact, the industry owes the plastic boom to the current administration, which has encouraged card use by offering tax deductions on part of credit-card spending and introducing a lottery on card slips. In 1998, Koreans spent approximately 30 trillion won ($22.8 billion) with credit cards. By the third quarter of last year, the amount nearly quadrupled to more than 115 trillion won. According to government statistics, some 81 million cards had been issued as of the end of 2001. In other words, each Korean has an average of two credit cards.
Now that credit cards have become a common thing in the lives of Koreans, we believe in a sweeping overhaul of the current system including issuance, circulation and tax. While trying to promote the advantages of credit cards in making transactions more transparent, the government should reform the system to minimize its evil effects. The authorities should make stricter the regulation that requires a card firm to confirm that a potential cardholder has steady income. There is an urgent need to stop card companies from issuing the plastic indiscriminately. Such a reckless practice has resulted in more than 1 million credit-card delinquents, including some 7,000 teenagers.
Card fees, which cause the most grievances among cardholders, should also be rectified. As the fair-trade watchdog has found, it is outrageous to charge an average interest rate of 20 percent a year on card loans or installments in a country where the benchmark rate stands at about 4 percent. The government, which has encouraged people to use credit cards but refuses to accept cards for tax payment, should consider the contradiction.