Warning of abusing Credit Cards
Status quo, the numbers of cards that are distributed in market increased 11.5% compared to last year. This phenomenon was caused due to cutthroat competition among card companies. They are trying to expand their size of company and during that process, companies do not consider consumers’ credit rating which is threatening consumers’ credit.
But, now it’s hard for card companies to issue credit cards easily to consumers. In past, because of the loose credit standards, there were actually few limits regarding issuing credit cards to people who were considered as having low repayment capability. However, the department of Financial Supervisory Service made new and strict guidelines.
The departments of Financial Services Commission and Financial Supervisory Service have designated 4 parts that are going to be supervised. Each of them is <Assets of loan>, < limits of using credit card>, <numbers of credit card> and <cost of marketing>. Specific policies include limits of using credit cards per year to 5% and limits of increasing numbers of credit cards to 3%.
Increasing rate of loan portfolio is controlled between 2% and 3%. The main reason of this regulation is number of credit cards. As said above, increasing rate of numbers of credit card was 11.5%, as a result, total numbers of credit card are 120 million which is 5 times more than economically active populations. But regarding this regulation, there are some controversies.
First, many regulations are absolutely advantageous to ‘leading companies’. When it comes to issuing new card to 3%, leading card companies do not care that much. But it could cause critical damage to other companies who have strived to increase the numbers of credit card. For instance, Shinhan Card can issue new 900 thousand credit cards because they already have issued 30 million cards. But compared to that, other companies who have issued 5 million cards, they can only issue 150 thousands credit cards.
Second, there is a rumor that regulation of increasing rate of loan portfolio was made to boost saving banks. By, restricting cards and cash advance could attract ordinary people to saving banks. Another claim that default rate of card companies are very low so it would rarely cause crisis also accelerates the conspiracy.
Regarding this issue, Card companies have shown strong opposition. “It could be regarded as direct interference to company”, “It means do not make profit”. Also, an official of one card company said “It makes other following companies hard to enter into market.”
But, to deal with excessive point policy, interest-free installment and other policies, strong regulations have been viewed as necessary solutions. As the captains of Financial Services Commission and Financial Supervisory asked for ‘strong and direct regulation’, these would be long-term measures.
In fact, officials of Financial Services Commission have already found 20 thousand improper cases and those cases were focused on big 6 companies including Shinhan, Hyundai, KB, Samsung, Lotte and Hana SK.
Financial Services Commission has been received the management plans from all card companies and those companies who have violated the rules more than 2 months, would be especially supervised.
한 주 현/ Han Ju Hyun/ email@example.com