Amid deepening controversy between large-sized retailers and credit card companies over card transaction fee hikes, South Korea’s chief financial regulator has taken a neutral stance, only stressing that it will press criminal charges if large companies break the law during negotiations.
The Financial Services Commission on Tuesday laid out its stance on the issue that earned recent attention when Hyundai Motor’s fee discussions with local card firms led the automaker to terminate its contracts with them. The move meant that consumers using those cards were suddenly unable to use them at Hyundai Motor outlets.
Last week, Shinhan Card, Samsung Card and Lotte Card capitulated to Hyundai’s proposition to raise the transaction fee from by around 0.4 percent last week, following weeks of unsuccessful negotiations as the card firms had demanded a higher rate increase.
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(123RF) |
Local credit card providers are moving to charge higher transaction fees to larger clients -- including telecommunications, consumer retail and airline companies -- after profit-cutting changes to local card transaction fee regulations took effect in November.
The FSC said in a statement regarding the ongoing issue that “card transaction fees should be determined under a voluntary agreement between the relevant parties, within the bounds of the cost-based fee rates stipulated by the Specialized Credit Finance Business Act.”
“However, should the FSC discovers any legal breaches by a large-sized retailer or card company in the process of monitoring the negotiations process, it will take punitive action.”
The FSC’s financial industry bureau director Yoon Chang-ho explained that if the criminal punishments were deemed too weak, it might push for legislation to strengthen them.
A large-sized company that leverages its upper negotiating position to demand fee rates below the legal limit is subject to a one-year prison term or 10 million won ($8,850) in fines. Card companies that provide illegal rebates or demand fees outside the legal limits from retailers are also subject to legal repercussions.
Despite the FSC’s neutral stance, the latest conflict stems from the government’s measures.
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(Yonhap) |
Last year, the FSC ordered credit card companies here to lower their transaction fees for small businesses and merchants with less than 3 billion won in annual revenue, extending the threshold from the previous 50 million won.
To even out the losses, the FSC simultaneously allowed credit card firms to claim higher “marketing activity fees” from client firms with more than 50 billion won in annual revenue, enabling fees to be raised by up to 0.25 percentage point.
In line with the changes, credit card companies recently notified those large clients that they would be raising their transaction fees.
But major companies, consumer brands, supermarkets and retailers here that handle a high volume of card payments have refused to accept the new terms, claiming they are unfair and lack due justification.
By Sohn Ji-young (
jys@heraldcorp.com)
