Suspended card firms lose 3 million customers

Financial regulators will lift an operating ban on the three credit card firms that leaked the private information of a total of more than 100 million customers in January, on May 17.

The three card issuers ― KB Kookmin, NongHyup and Lotte ― have been under the supervisory sanction of a partial business suspension for three months.

While the firms will be allowed to resume full operations in a week, the three-month-long suspension has dealt a blow in terms of earnings and credibility, according to data held by the Financial Supervisory Service.

Between late January and early May, more than 3 million cardholders of the three were found to have canceled contracts. Further, the firms have been banned from attracting new customers during the period.

Considering their earlier income level from loan interest and service charges, they are estimated to have suffered a combined loss of about 120 billion won ($114 million), said FSS officials.

KB Kookmin topped the list with 50 billion won in losses, followed by NongHyup with 40 billion won and Lotte with 30 billion won.

FSS officials predicted that the three will see their yearly net profit plunge from 410 billion won in 2013 to 250 billion won this year.

Further, regulators are poised to rigidly censure incumbent and former chief executives of the issuers. Some senior executives could face dismissal as the FSS had already pledged to take stern disciplinary action against the firms and top management.

“Then CEOs of the three firms voluntarily stepped down right after the data leak hit the nation in January,” a market insider said. “Now the remaining issue is whether financial authorities would choose to sanction executives of the card units’ parent firms (such as KB Financial Group and NH NongHyup Financial Group).”

The figures who had resigned in the wake of the massive leak included KB Kookmin Card CEO Shim Jae-oh, KB Kookmin Bank CEO Lee Kun-ho, NongHyup Card CEO Sohn Kyung-shik and Lotte Card CEO Park Sang-hoon.

In a desperate effort to make up for the loss, the three firms are expected to launch aggressive marketing and promotion campaigns as soon as the regulatory ban is lifted.

A spokesman for one of the three said his company plans to expand social contribution activities in a bid to recover its credibility. He added that customer gratitude events are also scheduled.

Meanwhile, the Financial Consumer Agency, a consumer advocate, is set to ask the FSS to conduct a further investigation into the three and some others to reveal more misconducts involving lax controlling of cybersecurity.

By Kim Yon-se (kys@heraldcorp.com)