FSC’s credit card plans not deemed sufficientKorea’s financial regulators are set to ban credit card companies from issuing cards to people with low credit ratings, among other measures to streamline the sector.
The Financial Services Commission and the Financial Supervisory Service released a 34-page plan to “improve the structure of credit card usage” in Korea yesterday.
The plan also allows for the automatic cancelation of inactive credit cards and more tax breaks on debit card payments.
However, the highly anticipated set of measures failed to directly address much of the controversy surrounding the sector, especially criticism that card transaction fees, or kickbacks paid by card payment network operators, are unfair.
The government has apparently deferred to card companies to roll out solutions to these problems or wait for the results of further research.
Focused around measures to bolster debit card usage in a nation where only 9 percent of card payments came from debit cards as of 2009, regulators also said they would limit the issuance of credit cards to legal adults aged 21 or over with credit ratings of six or higher. But exceptions can be made for individuals who can prove they have a steady income or are otherwise able to pay off their card bills.
To reduce the costs that currently make up some of the card transaction fees, regulators will also put in place an automatic system of discontinuing credit cards that are unused for one year.
As another measure, they will crack down on card companies that offer what are deemed to be excessive value-added services by making sure the card companies keep their original offer. In the past, many of these initial perks have disappeared later on after the customer has signed up.
Meanwhile, the tax exemption on debit card usage will be expanded from 25 percent to 30 percent of the amount charged, and the FSC said it is still in talks with the Ministry of Strategy and Finance to expand the 3 million won ($2,600) upper limit on the tax break.
Financial regulators also plan to encourage a wider issuance of advanced debit cards, including the integrated circuit cards that have adopted what is known in the U.K. as the “chip and PIN” system.
But as previously forecast, yesterday’s measures did not directly address much of the controversy surrounding card transaction fees.
“There will be further research done by expert institutions on restructuring the card transaction fee structure,” said Seo Tae-jong, a director general at the FSC. “But we believe that assigning transaction fees according to business sector is not sufficient, and the fees will need to be differentiated according to the benefits and costs gained by companies from card payments.”
By Lee Jung-yoon [firstname.lastname@example.org]
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