Card firms oppose regulation on transaction feesLocal credit card companies are expressing frustration as the National Assembly is accelerating the passing of a bill that grants the government the authority to set fees for card transactions.
On Friday, the parliament’s National Policy Committee passed a revised bill that allows the government to unilaterally set the rate of card transaction charges, which is in response to mounting complaints made by small business owners that the commission rate card firms charge is too high.
“There can be legislative and policy measures that protect merchants and small- and mid-sized business owners, for example, by setting low rates specifically targeting them, but it is unlawful to give government total control in setting card commission rates,” said an official from the Credit Finance Association yesterday.
The association is a trade group for credit card firms and other lenders. “Such moves go against market principle,” the official said.
The official also noted that “there is no precedent in any other countries where the government has dominant control over setting transaction rates instead of card firms.”
The lawmakers’ move comes as small business owners have been holding protests urging card firms to lower transaction fees. Self-employed businesses including hair salons, jewelers, and Internet cafes have also claimed that they will hold a massive protest later this month and boycott major credit card firms.
They have been complaining that they are charged commission rates much higher than those for businesses run by large conglomerates such as department stores and golf courses, condemning their unfair practices. According to the Korea Federation of Small and Medium Business, the commission rates small businesses are required to pay card firms is in between 2.5 percent and 3.5 percent, while rates for businesses run by chaebol such as large discount stores are 1.5 percent.
Critics, however, say that the National Assembly’s move is due to the coming legislative and presidential elections in April and December, respectively, and that both the ruling and opposition parties are chasing after public votes and sentiment.
Heads of credit card firms also expressed concerns and criticized the legislative move using social network services.
Hyundai Card President Chung Tae-young posted on Twitter, saying that the card industry is as competitive as any other industry and it is wrong to think that card firms earn easy profits via commission rates.
KB Kookmin Card President Choi Gi-eui also expressed concerns on his Facebook page, saying “What will happen in the future if a seller is excluded from having the right to set prices?”
He then referred to the epitaph on English playwright George Bernard Shaw’s gravestone: “I knew if I stayed around long enough, something like this would happen.”
According to industry sources, card firm heads agree that the overall card transaction system should be overhauled because it is outdated, remaining changed for more than 30 years.
Card firms are also arguing that the card industry is a very competitive industry and the transaction fees should be left to the market to decide.
By Lee Eun-joo [firstname.lastname@example.org]
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