There are more than 1.5 million small business establishments, mostly eateries, with annual sales of less than 200 million won ($180,000). They pay 1.8 percent fees to credit card companies. Since late last year, owners of these places have moved collectively through their associations to get the rates lowered, threatening to temporarily close their businesses nationwide in protest. They were encouraged to do this after credit card firms were pressured into lowering rates for department stores and automakers.
Dashing toward the April elections, politicians cannot miss the cries of so many smalltime business owners. Last week, a National Assembly subcommittee passed a bill to authorize the administration to set the rates of credit card fees for small clients by presidential decree. Bipartisan support in the plenary session later this week is expected as no party wants to be seen as denying benefits for those numerous operators of seollongtang and haejangguk houses. Also passed by the same subcommittee was a special bill aiming to retroactively help depositors at defunct savings banks.
Credit card fees are charged to shops in return for a service. Now, the legislation is seeking to have the administration fix prices for certain businesses in the free market system. Officials at the Financial Supervisory Commission, which would standardize the fees if the bill passes, are terming the legislative action as an outright violation of the constitutional freedom of business and denial of market economy rules. The presidential office is warning it will veto these bills.
At present, the “small clients” category is at the lowest level in the credit card rates chart topped by “pleasure and luxury businesses” with 4.5 percent, jewelers with 3.5 percent and home shopping with 2.7 percent. Their rates were set through “administrative guidance” arrangements between the FSC and credit card companies. Further guidance steps are called for to reflect the situation of smalltime merchants and profits gained by credit card companies, but direct interference by the legislature is undesirable.
Business associations have already staged demonstrations protesting what they believe to be exorbitantly high credit card fees. Once the proposed system becomes law and credit card rates are readjusted each year by the FSC, neither the credit card companies nor individual business owners will be satisfied and there will be endless petitions and protests to the financial authorities from both sides.
