Credit card firms threatened to suspend payment services for customers “based on interest-free installment” later this month yet again, in response to retailers’ refusal to share “marketing event expenses.”
Samsung, Hyundai, Hana SK and Lotte will halt the interest-free payment services starting on Feb. 17 with the other two ― BC and KB Kookmin ― following suit at the end of this month.
While the credit card industry called on retailers to account for at least 50 percent of interest costs offered at their own branches, retailers took the stance that they are not responsible for paying for credit card firms’ “marketing event expenses.”
Among the retailers are large discount chains, department stores, duty-free shops, airlines, telecommunication service providers, online shopping malls and insurance firms.
Credit card firms resumed interest-free installment services over the past few weeks amid growing complaints among consumers.
“When the services will be suspended again this month (in the wake of the protracted dispute between the credit card industry and retailers), it may be difficult for us to resume the services at least for a few months,” said a spokesman in the Non-Bank Financial Service Association.
Previously, credit card firms paid most of the financial costs for interest-free installments for big stores and customers, but required stores to share the burden to offset their losses incurred by a fall in transaction fee income.
Policymakers have revised the Credit Finance Law to basically lower the average credit card transaction rate to 1.5 percent from the previous 2.09 percent by leveling varying charges, in an attempt to help support small and medium-sized businesses as well as customers.
Credit card firms had given favorable transaction fees to large retail chains and big companies due to their dominant market position, while charging a regular fee for small players, a discriminative practice that drew criticism from merchants.
Credit card firms spent about 1.2 trillion won ($1 billion) for interest-free installment plan services on behalf of customers and major businesses in partnerships such as discount chains, telecoms and airlines.
They, however, argue that they cannot afford the whole interest costs under the revised transaction fee system.
A credit card industry official said it is illegal for big stores to unfairly request credit card firms to cover more than half of the expenses in their own promotional event,” an official from a card firm said.
“So it is fair for credit card firms and stores to share the financial burden for interest-free installment plan services.”
He claimed that discount chains, telecoms and airlines used such services as a marketing tool to lure customers but shifted the related financial burden to credit card firms.
Meanwhile, the credit card industry has also reduced their benefit programs such as discounts, cash-back programs and reward points to cope with the deduction in transaction fees.
By Kim Yon-se (
kys@heraldcorp.com)
