FSC tightening credit card eligibilityLocal citizens with bad credit may find it harder to get new credit cards by August as the Financial Services Commission (FSC) outlined yesterday new regulations to discourage profligate credit card usage.
As part of follow-up measures to the Specialized Credit Financial Business Act, which was revised in late February, the financial policy maker said it will prevent people under 20 from being issued with new credit cards.
“[The FSC] has been pursuing a comprehensive set of measures to restructure the credit card market since late last year in order to resolve the [negative] side effects of the market’s rapid growth, such as the overuse of credit cards and conflicts over transaction fees [charged to stores],” said FSC Director General Lee Hae-sun in a press briefing.
The FSC said that money spent on credit cards took up 61.3 percent of the nation’s private final consumption expenditure in 2011, up from 49.7 percent in 2008. As of the end of last year, Koreans held an average of 4.9 credit cards.
The new regulations, slated to take effect in August, will only allow people over 20 to receive new credit cards, unlike the past when applicants’ only needed the permission of a parent or guardian.
People with credit ratings of seven or lower will also be barred from getting new credit cards, although exceptions will be made for those who can present proof of their ability to pay.
Certain exemptions will also apply to so-called “hybrid” cards with credit limits of 300,000 won, the FSC said. Hybrid cards are debit cards that turn into credit cards when the account balance empties out.
Meanwhile, regulators postponed decisions on the most controversial issue of the revised law - how to carry out its new legal power to determine credit card companies’ transaction fees for small businesses. The FSC said it will present policy directions before the end of the second quarter, buying time ahead of a hearing next Thursday aimed at building a consensus.
By Lee Jung-yoon [firstname.lastname@example.org]