These days, we prefer using our credit card to making payment in cash. Why? There are many offers provided by credit card companies, such as point-accumulation system, free gift vouchers for VIP customers, and some other additional benefits available at credit card member stores. Even if you are not very much interested in all those extra things, you would love the convenience of using credit card.
However, with a wide usage of credit card payment, there have been concerns raised. This is because the related regulatory framework has not been updated for the last 35 years. The issue of ‘transaction fee’ has been talked a lot, since the standard was regarded as going against fairness. Many made complaints about the transaction fee system being unambiguous, inadequate, and outdated.
In response to the concerns, FSC introduced ‘Enforcement Rules of the Specialized Credit Financial Business Act’ in July. The Act is going through the legislative process from September to December, and will be effective as of 22nd of December this year. For this Enforcement Rules, FSC organized a professional study group consisting of professionals from Korea Development Institute, Korea Institute of Finance, and renowned accounting firms such as PwC. Also, FSC’s special task force has been operating, and a public hearing was held to gather various opinions.
What are the details of the Act? The Act is to completely reform the current merchant fee system, which is to prevent an overheated credit card market and to protect the rights of credit card users. The details are as follows;
- Credit card companies should follow the principles and standard proposed by FSC whenever calculating merchant fee
- Large retailers not given any superior position to small merchants, not being allowed to claim lower merchant fee to credit card companies
- SMEs are given preferential treatment of lower merchant fee
- The sector-based merchant fee scheme is changed to an individual merchant-based fee scheme
- Supervisory system becomes much stricter to monitor any unfair practices in credit card industries
These changes in credit card scheme will be a new blow in credit card industries. It is expected to promote more sound operation of credit card companies as well as to encourage proper consumption patterns of households.