Big retailers stopped offering sales based on interest-free monthly installments, as a protest against the revised laws which would burden both credit card firms and card settlement membership stores for additional costs.
Despite customers’ complaints due to the unexpected halt of the zero-interest installment sales, retail chains including E-mart, online shopping mall G-market, Shinsegae Department Store and other retailers decided to ban the zero-interest installment promotions.
The long-standing dispute between credit card firms and retailers regarding interest free installment plans intensified with an amended credit finance regulation.
Until 2012, credit card companies had offered frequent zero-interest installment events to secure more customers, covering the entire interest expenses as part of their marketing strategy.
Simultaneously, credit card companies complained that big name retailers paid them excessively low commission rates ― between 1.1 percent and 1.5 percent ― despite large profits from the events, and asked to raise the rates to 1.85 percent to 1.89 percent, which the retailers dismissed.
While angry credit card firms requested retailers account for at least 50 percent of interest costs offered at their own branches, retailers said they are not responsible for paying for credit card firms’ “marketing event expenses.”
Admitting that the zero-interest installment plans heavily burden credit card firms and boost retailers’ margins, the government amended the regulation so that retailers co-cover the interest charges, as credit card firms reguested.
Regarding the controversy, a Financial Supervisory Service official said the amended act’s intended objective was to block the possibility of credit card firms’ marketing fees being transferred to the customers. Instead, the retailers are inappropriately taking advantage of the customers, the official said.
Pointing out that some credit cards still offer interest-free installment plans, the FSS official stated that the state regulator is following up on the negotiation process between the credit card firms and the retailers.
By Chung Joo-won (
jooowonc@heraldcorp.com)
