Financial regulator and card firms say move undermines market principles
The Korean government and credit card companies on Monday expressed strong opposition to a revision of the Credit Finance Business Act that, if passed at the plenary session of the National Assembly, would authorize the Financial Services Commission to set the commission rates credit card firms collect from small merchants.
Credit card companies said they would take steps to block a revision of the bill that they claim goes against the Constitution. The FSC also said it is opposed to the proposed bill, saying that the government should not set prices in the private sector.
The National Policy Committee at the National Assembly passed the revision proposal on Feb. 10, which contains the controversial clause giving the FSC power to determine the commission rates. Except for one opposition party member, all the committee members supported the revision proposal.
Both the Lee Myung-bak administration and the credit card industry oppose the revision to the bill that has been floated by lawmakers ahead of the general elections.
FSC chief Kim Seok-dong on Monday clarified that the government should not interfere with the price-setting process in the market.
“Commission rates for small merchants should be voluntarily decided by credit card firms,” Kim said. “Making the government to set the commission rates goes against market principles.”
The Credit Finance Association, representing the credit card industry, and credit card firms’ labor unions are planning to fight the planned legislation. The association claims that the revision of the bill is in violation of the Constitution, which ensures basic rights such as the pursuit of happiness and property rights. The industry association said it will try to inform lawmakers of the potential problems in the proposed bill.
Top executives at major credit card firms including Shinhan, Samsung and Hana SK gathered together on Friday and agreed to join forces in opposing the bill that could hamper their business.
The dispute came after credit card firms gave in to the public pressure last year concerning the complicated commission system that supposedly favored only large conglomerates and levied burdensome rates on small restaurant owners.
Even if the bill gets passed at the plenary session of the National Assembly, card firms have pledged to fight on to the Constitutional Court, heralding a drawn-out battle between card firms, the government and lawmakers.
Labor unions at credit card companies are strongly opposed to the revised bill that could hurt their companies’ profitability as well as job security. Some union members staged a rally in Seoul on Monday, criticizing the revision to the bill that regulates the financial sector.
By Yang Sung-jin (
insight@heraldcorp.com)
