Card firms mull clearing debt incurred by fraud

Domestic credit card companies are reportedly reviewing whether to bear some of the losses sustained by victims of phone-based card loan fraud in an answer to pressure from the public and the government to take responsibility for their lax screening process for loan approvals.

The card sector is in the process of devising a common standard for reducing the loan amounts of which customers were defrauded, but not all loans will be cleared.

Voice phishing, which sees card owners misled into providing their account details by fraudsters operating under the guise of official government agencies and impersonating their dialing codes, is on the rise in Korea. This has been partly blamed on credit card companies’ lack of screening before providing loans, and the trend is now developing into a larger social issue that has prompted regulators to belatedly roll out measures to try and curtail damages.

Credit card companies are reportedly discussing a common framework to clear some of the debt owed by victims of phone-based credit card loan fraud. They previously denied the viability of such a move but changed their tune when they started taking flak for shirking accountability regarding their lax personal screening of loan approvals.

Upon hearing of the rising losses being incurred by voice phishing victims, President Lee Myung-bak noted on Dec. 15 that “financial institutions should reach a consensus to bolster their system by one level.”

Currently, only victims defrauded before Dec. 8, when the screening of loans was tightened dramatically, are slated to qualify. And credit card firms said that the debt will only partially be cleared depending on the liability of the customer.

Since the first case was reported early this year, 1,999 cases have come to light as of the end of last month, with 20.2 billion won ($17.57 million) defrauded in total.

By Lee Jung-yoon [joyce@joongang.co.kr]