FSC vigilant in credit card disputeThe financial regulator insists that it is not sitting on the sidelines in the battle between companies and credit card issuers over fees.
The Financial Services Commission (FSC) said Tuesday that while it is following the principle of not interfering in negotiations between private companies, it is closely monitoring the situation to make sure no illegal activities are taking place. It is especially vigilant when it comes to large companies using their strong market positions to control commission rates.
It says that it is looking at possible criminal charges.
“The basic principle is independent negotiation,” said Yoon Chang-ho, the financial industry bureau director at the FSC. “It is inappropriate for the financial authority to be directly involved in the commission rate negotiation.”
The commission rate controversy arose earlier this month when Hyundai Motor demanded that credit card companies lower their commission rates and threatened to end contracts if it didn’t get its way.
Last week, the credit card companies accepted the terms set out by Hyundai Motor.
Other major automotive companies, including GM Korea and Samsung Renault, may also start working to lower commission rates, while retailers are reported to be mulling the idea.
Last year, the government pressured credit card issuers to lower their commission rates charged to small business - those with earnings less than 50 billion won ($44.12 million) - after many were struggling from rising labor costs resulting from the double-digit increase in the minimum wage for two consecutive years. The government’s goal was to ease the financial burden on small businesses. The credit card companies, seeking to balance their losses from the lowered commission rates, raised rates for larger companies starting this month.
The FSC has argued that the changes made last year were to correct the unfair commissions charged where credit card companies were imposing relatively high charges on small and midsize businesses to cover massive marketing expenses.
According to the FSC in 2017, credit card companies spent 360.9 billion won ($319.4 million) in marketing to telecommunications companies, while the revenue they made from credit card commissions charged to these companies totaled 353.1 billion won.
“While the marketing benefits were largely concentrated on large companies, because of their advantageous positions, they were able to get relatively low commission rates,” Yoon said. “We have changed the system in which the commission rate is calculated so that those that have benefited from the marketing expenses would face a higher commission rate to correct the unfairness.”
“At the center of the changes to the way credit card commission rates are calculated is imposing different commission rates according to the benefits,” said FSC Chairman Choi Jong-ku earlier this month.
BY LEE HO-JEONG [email@example.com]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)